How the Recent 4% Fed Rate Hike Changes the Game for Treasury Yields and Tech Stocks
Hey guys, it finally happened. After an agonizing 3 years and 5 months, the FOMC just bumped the interest rates up from 3.75% to 4%. Right after the announcement hit the wires, the US markets saw a bit of a rally. But the mood shifted completely the moment Fed Chair Kevin Warsh took the mic for his press conference. We saw prices sliding downward during his speech, only to manage a very slight dead-cat bounce right before the closing bell.
This move actually lines up perfectly with what the FED WATCH tool was projecting. Warsh and the other 12 Fed members were totally unanimous in their decision to raise rates. Warsh explicitly pointed out that the US economy is still running pretty hot, and because half the population lives strictly paycheck to paycheck without substantial asset income or pensions, their ultimate goal remains crushing inflation back down to that elusive 2% target.
As for the market fallout, the S&P 500 slipped by 0.45%, and the Nasdaq ended virtually flat with a tiny 0.01% drop. Even the darling of dividend investors, SCHD, took a 1.43% hit. But interestingly, semiconductor ETFs held their ground—SOXX and SMH both climbed 0.64%. Altria, known for its massive dividend payouts, also eked out a 0.42% gain.
The biggest takeaway for me right now is what's happening with US 10-year Treasury bonds. With yields creeping up around the 5% mark, bond ETF prices have become incredibly cheap. Getting a 5% yield is roughly 50% better than what most basic bank savings accounts are offering right now.
If you are investing through a Korean pension account, the TIGER US 10-Year Treasury Futures ETF is practically your only direct play here. I'm definitely planning to accumulate this on every dip throughout the second half of the year.
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