U.S. Stock Valuations Under Pressure as Fed Rate Hike Approaches

CITIC Securities' research report indicates that U.S. stock valuations are under pressure in the short term, regardless of whether the Federal Reserve raises rates in September. In the medium to long term, the conclusion of rate hikes is expected to alleviate valuation pressures. Coupled with the positive stance of the "Productivity and Employment Working Group" towards AI, the narrative around AI in U.S. stocks is likely to continue in the long run. On July 29, the FOMC held rates steady for the fifth consecutive time, with three voting members supporting a 25 basis point hike, revealing divisions within the Fed. Market reactions showed a split between "dovish on the short end, hawkish on the long end." Rising inflation expectations have pressured the dollar and provided a window for the Japanese Ministry of Finance to intervene in the currency market. The rapid growth of CSP cloud services has somewhat alleviated concerns about the sustainability of AI's triple capital expenditures. Short-term interest rate-sensitive sectors, high-valuation low-growth segments, and small-cap stocks are under pressure, with the market focusing on the Jackson Hole conference at the end of August or the September monetary policy meeting as the next potential turning point for liquidity expectations.