Interest rates “cool down”, when will VN-Index enter the wave?

Experts said that there is a high possibility that the market will move sideways until the end of the second quarter of 2023, but the closer to the end of the year, the more opportunities will open up when policies gradually seep into practice.

Although domestic interest rates are still anchored at a high level and the Fed’s move is not really clear, recent signs of lowering interest rates have brought hope to the stock market.

So what is the interest rate roadmap in the coming time? After the monetary policy reversal, when will the stock market create a long-term bottom and go up? In the seminar “The rain has cleared, it’s going to be morning” organized by Yuanta Securities, Mr. Nguyen The Minh – Director Yuanta Securities Analysis offers a few observations.

Interest rates will continue to cool down

Regarding the Fed’s move, the expert said that the stubbornness of inflation may still have some impact on the agency’s decision. Most importantly, however, inflation is no longer the Fed’s top target in 2023.

After a series of failures of many world banks along with the rising unemployment rate, the Fed will have to recalculate interest rates to support economic growth. Most likely, this agency will have to accept to target inflation higher than expected.

The evidence is that in the minutes of the 2022 meeting, the Fed only emphasized exactly one goal, which is to control inflation. However, in the minutes of the recent meeting, the Fed’s target is not only inflation but also recession fears.  

According to Mr. Minh, the Fed Fund interest rate could reach 5.07% this year. It is likely that the Fed will raise interest rates by 0.25% in May and be the last rate hike in 2023. Even, the Fed may “turn around” to reduce interest rates in the second half of the year to prevent recession.

Thus, a recession will be the next variable for the Fed to conduct monetary policy. In particular, according to Mr. Minh’s observation, the Fed is making a move to buy bonds to stimulate demand again, instead of selling bonds to narrow the money supply like last year.

“We can’t expect the cheap money environment yet, but the expensive money flow will also end soon,” said Mr. Nguyen The Minh.

Regarding the domestic context, inflation in March continued to cool down and inflation is expected to continue to slow down in the coming months due to the high base level of the same period in 2022 and the gradually recovering supply of goods. Inflation for the whole year 2023 is likely to be within the target level below 4.5%. However, it should be noted that inflationary pressures may increase after China opens up.

Regarding interest rates, expert Yuanta said that it is difficult for domestic interest rates to fall sharply, but they have passed the peak period by the end of 2022. In order to achieve the GDP growth target, monetary policy may gradually loosen further. . There is a high probability that there will be a reduction in basic interest rates after June, which is a premise to reduce other interest rates, especially lending rates.

When will stocks bottom and go up?

Even if there is a reversal of monetary policy, the stock market will not be able to break out overnight but with a certain delay. The delay of the market is to wait to see if the supportive moves and interest rate levels are enough to bring the economy and businesses back to growth and absorb it.

For US stocks, Mr. Minh sees the current period as having many similarities with the two periods of 1968 – 1970 and 1972 – 1974 when interest rates negatively impacted the market. The reductions of the two periods above were 33.6% and 46.3%, respectively. However, when interest rates made a peak, the increase in 2 years after bottoming was 63% and 69% respectively.

With the view that Vietnamese securities have many similarities with US stocks, the expert said that when the interest rate peak passes, the stock market will create a long-term bottom and go up. It is highly likely that the market will be volatile until the end of the second quarter of 2023, but the closer to the end of the year, the more opportunities will open up when policies gradually seep into reality.

According to statistics in the past, after each period of creating a peak of interest rates, VN-Index took about 7 months to create an upward bottom. According to Mr. Minh, interest rates started to peak at the beginning of the year and around after August this year, the stock market can create a long-term bottom and start to go up strongly.

Regarding technical indicators, expert Yuanta assessed that VN-Index is in correction wave 2. The possibility that the market will expand to 1,124 or higher is 1,165 in April-May and correct in May-June. At the same time, the VN-Index may reach the highest level in the range of 1,258 – 1,265 points in the last months of the year.

Ha Anh/Market life