MetaEra: U.S. Equities Face Valuation Pressure Amid Fed Rate Hike Outlook

According to a CITIC Securities research report, after missing this rate hike cycle, U.S. equity valuations will face pressure in the short term regardless of whether the Fed hikes in September; however, in the medium to long term, the completion of rate hikes could alleviate valuation constraints, and combined with the positive stance of the “Productivity and Employment Task Force” toward AI, the AI narrative in U.S. equities is likely to persist long-term. On July 29, the FOMC held rates steady for the fifth consecutive meeting, with three voting members supporting a 25-basis-point hike, revealing public divisions within the Fed. Markets responded with a split sentiment—short-term dovishness and long-term hawkishness—while rising inflation expectations pressured the dollar and created an opening for Japan’s Ministry of Finance to intervene in currency markets. The strong growth in CSP cloud services has somewhat alleviated concerns about the sustainability of AI-related capital expenditures. Short-term interest-rate-sensitive sectors, high-valuation low-growth stocks, and small-cap equities are under pressure; the next key window for a shift in liquidity expectations is the Jackson Hole symposium at the end of August or the September FOMC meeting. (Source: ODAILY)