Fidelity: The Federal Reserve may not start the interest rate hike cycle until December, but the possibility of a rate hike in September has not been eliminated

According to Zhitong Finance APP, Salman Ahmed, Head of Global Macro and Strategic Asset Allocation at Fidelity International, stated that the U.S. Federal Reserve held its ground for the fifth consecutive time yesterday, maintaining the federal funds rate range at 3.5% to 3.75%, in line with market expectations. This rate decision was passed with a 9 to 3 voting result, with three committee members voting against it, favoring a 0.25% rate hike. Following this meeting, the market further lowered the likelihood of a rate hike in the near term, and the yield curve exhibited a steepening trend: short-term yields fell as expectations for a September rate hike cooled, while long-term bonds were sold off due to unclear medium- to long-term inflation, fiscal, and policy outlooks. The yield on 30-year U.S. Treasuries rose by 11 basis points to 5.20%, reaching a new high since July 2007.

However, due to President Trump's threat to "hit Iran hard," tensions in Middle Eastern geopolitics have escalated, causing Brent crude oil prices to rise to $90. Coupled with market concerns over capital expenditures related to artificial intelligence (AI), potential supply surplus, and rising long-term yields, the U.S. stock market fell broadly, with semiconductor and memory stocks leading the decline, and large tech stocks generally dropping.

Fidelity believes that the Federal Reserve is more likely to start the rate hike cycle in December, provided that inflation and labor market data continue to remain strong. However, economic data and geopolitical developments over the next two months could still raise inflation risks, so the possibility of a September rate hike has not been completely eliminated. More importantly, this decision highlights the policy characteristics of the Walsh era: in the absence of a clear policy framework and forward guidance, the Federal Reserve will rely more on immediate economic data and changes in the financial environment for judgment. This means that market expectations for policy paths may be frequently adjusted, and interest rates and asset prices may fluctuate more easily with data and officials' statements. Policy uncertainty and market volatility may remain high, potentially becoming the new normal in the Walsh era.

Recently, tensions between the U.S. and Iran have escalated again, coupled with investors' heightened concerns over AI-related capital expenditures, potential supply surplus, and rising long-term bond yields, leading to increased market volatility. However, these factors currently mainly affect market sentiment and valuations, and have not changed the fundamental trends of the global economy and corporate earnings. Corporate earnings remain robust, fiscal policy and AI investments continue to support economic activity; AI remains an important long-term growth theme, and global economic expansion has not been interrupted, which still favors the performance of risk assets in the medium to long term.

In terms of investment strategy, corporate earnings growth still has potential. Fidelity maintains an overweight in equities and is relatively optimistic about the valuations and earnings momentum of Japan and emerging markets; however, U.S. large tech stocks are overvalued, and attention should be paid to market concentration and AI investment returns. Regarding bonds, inflation, fiscal expansion, and policy uncertainty may limit the downward space for long-term yields, thus maintaining a neutral stance on government bonds; at the same time, given that credit spreads have narrowed significantly, Fidelity remains cautious on credit bonds. Investors can dynamically adjust their global multi-asset strategies to cope with the current environment of increased volatility, focusing on high-quality companies, and combining global dividend strategies with quality bond allocations to pursue stable long-term returns