Reported 7 months ago
On June 13, 2024, the Federal Reserve met market expectations by maintaining the federal funds rate at 5.25% to 5.5% and hinting at reducing interest rates only once this year instead of three times. Despite concerns that this might cause a stock market decline, the US stock market continued to reach historic highs. Fund managers at Juhong Buy Fund believe that the level of the federal funds rate is no longer the focus; rather, the key to observing the US stock market lies in whether AI can increase productivity and if more companies will increase investment. It's noted that American economic data has been mostly positive, and even the slightly weaker economic growth rate in Q1 was due to a strong dollar leading to a significant increase in imports, while the final private demand growth rate excluding net exports and government spending was 2.8%, indicating a healthy US economy. The recent dot graph released by the Fed adjusted rate and inflation rate estimates and raised the long-term rate estimate from 2.6% to 2.8%. Furthermore, the Fed Chairman Powell mentioned a significant increase in spending on equipment and intangible assets in the US, with many new high-tech factories under construction, suggesting that AI is reviving the willingness of businesses to invest by increasing productivity, potentially translating into higher productivity funding demands in the future, thus causing long-term interest rates in the US to rise. Overall, the focus is now on whether AI can enhance productivity and stimulate more business investments, rather than the level of the federal funds rate, as the key to replicating the economic and stock market boom of the 1990s in the US. Investment experts recommend US stock funds or growth funds for asset allocation.
Source: YAHOO