TISCO ESU dreaded to cut interest rates Investors sell 'shares', suggesting to avoid emerging markets


HoonSmart.com >> TISCO Economic and Strategy Center pointed out that the Fed does not sign the rate cut continuously as the market expects. Suggest that the market may be disappointed until selling "stocks" again. Suggest to avoid investing in emerging markets, focusing on gold, REIT and healthcare.

Komsorn Prakobprang, head of the TISCO ESU, said that although the latest FOMC meeting has resolved 7 to 3, the policy rate was reduced by 25bps to 1.75%. -2.00% as investors expected This is the second interest rate cut (for the first time at the end of July meeting). But the worry is that the Fed does not signal a rate cut continuously. Contrary to the expectations of investors.

At the press conference, Jerome Powell, the Fed's president, stressed that the rate cut is just a mid cycle adjustment, and the Fed doesn't have to. Continuous interest reduction Meanwhile, investors still expect the Fed to cut interest rates 1 more time this year and 2 times next year. In the future, there is a lot of risk that investors will sell risk assets if the Fed does not cut interest rates continuously as expected.

"According to the Fed's FOMC Median Dot Plot, the Fed has announced that the Fed will keep interest rates at 1.75% -2.00% until the end of 2020, in contrast with investors in the Fed Funds Futures market that still has High expectations that the Fed will cut interest rates continuously. Investors also expect the Fed to cut interest rates one more time this year and another 1-2 times in 2020, which is still greater than the US Monetary Policy Committee. Which encourages the interest rate cut the most, which is seen to reduce interest once more Therefore, there is a risk that investors may be disappointed if the Fed cut interest rates less than expected. And causing another sell-off of risky assets like 'stocks', ”Komsorn said.

However, investors are advised to gradually reduce the risk of investment portfolios. By reducing the weight of investing in emerging market stocks that are highly volatile. And earnings trends are still being driven by the trade war Including commodity prices that are stable at a low level And recommends diversifying investment into assets that benefit from liquidity injection and interest reduction, such as gold and REITs and stocks in groups whose profits are not very volatile in the global economy. There is also a tendency to grow well in the long run, such as the Health Care group, etc.

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