This week, a US CPI data that completely exceeded expectations sent the whole of Wall Street into turmoil. As expectations of the Federal Reserve's interest rate cut gradually cool down, it has become a hot topic of discussion in the market.

Overnight, the 2-year US Treasury yield once rose above the 5% mark, the first time since November last year. Market participants believe that the current 2-year US bond yield continues to be close to the Fed's benchmark interest rate. Once the former rises above the latter, it may be difficult for the Fed to cut interest rates many times, and may even be forced to raise interest rates.

factuallyIn addition to the recent “hawkish wave” of Federal Reserve officials,Wall Street giants are beginning to be more pessimistic:

Goldman Sachs expects the Federal Reserve to cut interest rates twice this year, while Barclays expects to cut interest rates only once. Bank of America and Deutsche Bank agree that the Federal Reserve will only cut interest rates once in December this year. Deutsche Bank further stated that if future inflation data continues to disappoint, or if the election results lead to fiscal policies that increase inflation, then the Federal Reserve will not cut interest rates this year or 2025.

The CME Federal Reserve's observation tool also shows that the market currently expects the “first drop” to occur in September, and interest rates may only be cut 2 times this year.

At this point, how should investors deploy?

• Resources Unit

Judging from the heat map of the past 20 days, the “Periodic Table of Elements” market is once again on the rise. The non-ferrous metals market has recently begun to soar, and gold, silver, copper, etc. are competing to rise.

Zheshang Securities believes that re-inflation trading is expected to continue, and there is still room for further upward growth in industrial metals represented by copper; although gold prices will also benefit from re-inflation trading, risk aversion derived from the conflict between Palestine, Israel, Russia, and Ukraine is currently a more important influencing factor in gold prices. In the future, we need to focus on the evolution of geopolitical risk. If the risk escalates further, the gold price may still have room to rise.

Chengtong Securities said earlier that in the early stages of this commodity rise, it mainly traded the Fed's interest rate cut expectations. Commodities rushed up the Fed's interest rate cut ahead of schedule, but as the Fed's interest rate cut expectations continued to be postponed, commodity prices remained strong, mainly driven by a combination of factors such as depreciation in the intrinsic value of the US dollar and improved global demand.

Cheng Xiaoyong, deputy general manager of the Guangzhou Financial Holdings Futures Research Center, recently expressed the opinion that

This round of non-ferrous rise is the result of the resonance between financial attributes and commodity attributes. Although expectations of interest rate cuts have cooled down due to the strong US economy and stubborn inflation, investment demand brought about by financial attributes has declined somewhat, but commodity attributes still support the rise in non-ferrous metals prices.

Judging from the recent trend in gold, this also seems to have been verified. Although the US CPI data this Wednesday exceeded expectations, which once brought gold gains to a standstill in the middle of the week, this is clearly just an unimportant “episode” in the gold bull market.

The New York futures contract price rose above the $2,400 mark shortly after entering early Asian trading on Friday, and hit a new high.

Although gold has continued to reach record highs so far, Pepperstone's Michael Brown believes that media news/headline reports still haven't seen a real peak of coverage like during recent bull runs. In other words, this may drive the gold trend for a longer period of time until a sense of carnival finally sets in.

Previous articles“The price of gold has exploded to a record high! Wall Street analysts say it hasn't reached its peak yet; what investment opportunities can we pay attention to?》As mentioned, gold-related investment targets in the Hong Kong and US stock market are worth paying attention to, and looking at recent gold stock trends, the trend is also very encouraging. For example$ZIJIN MINING (02899.HK)$Since March, it has surged more than 40% to a record high.

Furthermore, the recent upward logic of copper is related to industrial production capacity and the boom in the global manufacturing industry.

Copper, known as “Dr. Copper,” is a cyclical commodity. It is a risky asset. It is greatly affected by the macroeconomic cycle on the demand side. The ratio between the two is very sensitive to macroeconomic trends. When market sentiment recovers or heats up, copper's price performance will surpass gold due to increased demand. However, when the economy is sluggish or is threatened with recession, copper's performance is often lower than that of gold.

Also, the previous article“AI chips are booming, and the big players are watching the copper price at a new high! How can the Hong Kong and US stock markets seize opportunities?》It also mentioned opportunities worth paying attention to in the Hong Kong and US stock markets.

Against the backdrop of global copper supply shortages, a possible decline in copper production from Chinese smelters, and an increase in copper demand driven by artificial intelligence, copper prices may also have room to rise in the future. As the world gradually removes carbon emissions, the energy transition, including electric vehicles and renewable energy technologies, is also expected to drive a surge in copper consumption over the next few years.

• Energy stocks

As crude oil prices continue to rise, energy stocks have become a brighter “rising star” than technology stocks in the US stock market.

There are two major logics behind the recent popularity of energy stocks in the capital market: first, oil demand is strong due to stronger global economic performance than expected; second, supply chain blockages caused by geopolitical crises such as the Russian-Ukrainian conflict and the Middle East conflict.

Previous articles“Outperform S&P and surpass Nvidia? This industry is becoming a new Wall Street favorite”Energy stocks that have seen impressive gains this year have also been listed. As of April 8,$Marathon Petroleum (MPC.US)$,$Valero Energy (VLO.US)$,$Phillips 66 (PSX.US)$,$Canadian Natural Resources (CNQ.US)$,$Pioneer Natural Resources (PXD.US)$,$Exxon Mobil (XOM.US)$,$ConocoPhillips (COP.US)$They all hit record highs last Friday, with gains in the 16%-48% range during the year; Buffett loves stocks$Occidental Petroleum (OXY.US)$This year, it has also accumulated a cumulative increase of over 16%.

• Technology stocks

With the massive sell-off in US debt, large technology stocks seemed to be replaced overnight once again as one of people's “safe haven” options. In addition to some company news from these science and technology companies themselves, the market also believes that the strong cash flow of these large companies can make them show strong resistance to falling.

What investors need to pay attention to is that as expectations of interest rate cuts cool down, the overall performance of the stock market is still not good. Because the market originally anticipated that the interest rate cut policy would soon be introduced, this expectation has already been reflected in the stock market to a certain extent. However, if the interest rate cut policy is delayed, then the valuation model will have to be adjusted accordingly, which will put some pressure on the stock market. In particular, some companies with high borrowing costs, or unprofitable companies, will be the most affected and should be the primary targets for reducing positions.

Editor/Somer