A summary of institutions' views on financial markets on May 27

On May 27, institutions summarized their views on the stock market, commodities, foreign exchange and the central bank's policy outlook.



1. Bank of America: The Fed may suspend interest rate hikes later, which means that medium and long-term yields have peaked;
① Bank of America said the latest policy remarks by Fed officials provided traders with an opportunity to bet on a pause in interest rate hikes after July.
②Ralph Axel and Bruno Braizinha said in the report that the speeches of Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic in the past two weeks have made people realize that financial market conditions may promote the Fed to slow down or even stop the pace of interest rate hikes in September. This has implications for both the overnight index swap rate and the 5-year rate.
③ They wrote: "We believe that market expectations for a pause in the Fed's tightening pace may increase in the next two months, and if this occurs, medium and long-term yields may have peaked".
④ Strategists said that investors can prepare for this in the following ways. One is to be the receiver of the overnight index swap rate in September at the 2.13% level. If the Fed keeps interest rates unchanged for the month, the overnight swap rate is expected to be around 1.83%. The target is 1.96%, which is between two hypothetical scenarios of keeping rates unchanged and raising them by 25 basis points.
⑤ Another possibility, Axel and Braizinha write, is to sell longer-dated bonds, especially 5-year maturities

2. Moody's: The negative outlook reflects the rising risk of Egypt's weakening ability to hedge against external shocks, affirms Egypt's "B2" rating, and downgrades the outlook to negative

3. Dennis Kissler, senior vice president of trading at BOK Financial: People realize that supply will continue to shrink, and that's what's driving crude higher

4. David Forrester, FX Strategist at AUM in Hong Kong: Given the risk of U.S. rate hikes pushing the economy into recession, it does reduce the attractiveness of U.S. assets relative to yen assets, so we agree with Kuroda in this regard . However, if U.S. economic data is firm and signals a soft landing, the attractiveness of U.S. assets will weigh on the yen

5. Bart Melek, head of commodity strategy at TD Securities: The minutes didn't change anything. The market has started to realize that the Fed will continue to take strong measures to control inflation. The story of tightening is not over by any stretch of the imagination, and it is safe to say that the interest rate environment will continue to become more restrictive

6. Moody's lowered its forecast for India's economic growth in 2022 again;
International credit rating agency Moody's lowered its forecast for India's economic growth in 2022 to 8.8% from the previous 9.1% on May 26, while maintaining the country's economic growth forecast at 5.4% in 2023. Rising crude oil, food and fertilizer prices will weigh on Indian household finances and spending in the coming months. Interest rate hikes to curb inflation from rising further will slow the demand recovery. Strong credit growth and a sharp increase in business investment intentions suggest that the investment cycle is strengthening. India's economy will still grow steadily unless crude oil and food prices rise further

7. JPMorgan: U.S. market investors may stay on the sidelines this summer;
① JPMorgan analyst Gabriela Santos predicted on Thursday that investors may stay on the sidelines this summer, watching inflation and economic developments before adding to their stock positions. Investors still lack confidence in increasing equity positions. Santos said investors will adopt a wait-and-see mode in the coming months, when more clarity will emerge on inflation, interest rates, growth and valuations;
②Santos pointed out that since the beginning of this year, U.S. stocks have fallen sharply, creating potential for long-term gains. However, she believes stocks have become so expensive by the end of 2021 that many investors don't think they've fallen enough to create a strong entry point. Investors will also keep a close eye on inflation data in the coming months as the Federal Reserve remains committed to controlling inflation. Upcoming corporate earnings are another key set of numbers investors will be watching closely

8. Moody's forecasts the economic prospects of many countries around the world;
Moody's said it lowered its forecast for South Korea's economic growth in 2022 to 2.5%, Japan's 2022 growth forecast to 2.4%, and its 2023 growth forecast to 1.2% due to a slowdown in exports due to supply chain disruptions %; risks that could further reduce economic forecasts include escalation of conflict between Russia and Ukraine; no recession is currently expected in G20 countries except Russia in 2022 or 2023; advanced economies are expected to grow by 2.6% in 2022 and emerging market countries by 3.8% %, down from 3.2% and 4.2% forecast in March; global growth forecast to decline due to the situation in Russia and Ukraine

9. Russ Mould, investment director at AJ Bell: UK energy windfall profits tax could backfire;
The UK government's temporary windfall tax on the profits of oil and gas companies is a short-term solution that could perpetuate higher prices if it fails to stimulate demand. As investors face inflation on the one hand and more aggressive wealth redistribution from governments on the other, capital preservation may become difficult, and so will their capital accumulation, as it was in the 1970s

10. JPMorgan Chase: Bitcoin is expected to rise, with a fair value close to $38,000;
Strategists such as JPMorgan’s Nikolaos Panigirtzoglou said bitcoin could move “significantly higher from its current price.” The fair value of Bitcoin is estimated to be close to $38,000. The strategists wrote that stablecoins’ share of total cryptocurrency market capitalization “looks too high, suggesting oversold and significant upside for the cryptocurrency market since then.”