Weekly Market Insights: Potential Fed’s Rate Hike This Week

The Federal Reserve’s upcoming two-day meeting has everyone on Wall Street anticipating a hike in the benchmark rate. This marks the tenth rate increase since last year as Chairman Jerome Powell and the board have tightened policy to combat inflation. However, recent shocks in the banking sector have forced the Fed to take a more cautious wait-and-see approach. Experts believe that it will likely be a 25 basis points hike. Powell’s press conference after the announcement should give more insight into the Fed’s future plans, so stay tuned for live market updates.

What’s happening this week?

Meanwhile, markets are also keeping a close eye on the debt ceiling fight in Washington. With a potential U.S. sovereign debt default looming as early as June 1st, Treasury Secretary Janet Yellen wrote to House Speaker Kevin McCarthy warning that the U.S. could run out of money to pay its bills. This has added even more tension to a process that is already fraught with partisan politics. McCarthy has pushed for significant spending cuts in exchange for raising the debt limit into next year, putting the 2024 campaign in the crosshairs. On the other hand, President Joe Biden has refused to negotiate on the limit, instead choosing to talk about spending in a separate context. A pivotal meeting is set to take place on May 9th with the president calling on key leaders to try and find a solution. As the situation unfolds, investors are advised to keep a close eye on any updates that may impact the markets.

We are halfway through the Q1 earnings season with 53% of the S&P500 companies having reported results as on Friday. 79% of S&P 500 companies has reported a positive EPS surprise and 74% of S&P 500 companies have reported a positive revenue surprise. Overall, the S&P 500 is reporting a year-over-year decline in earnings of -3.7%. Another 162 companies report this week, with key focus being on Apple to determine whether it can continue to deliver better-than-expected results as big tech players like Microsoft, Meta, Alphabet and Amazon.

What’s happening in Singapore?

The Singapore government’s recent move to introduce property cooling measures was not unexpected, given the country’s property prices have been on the rise for 12 consecutive quarters, bucking global economic trends. The measures are seen as a pre-emptive move to manage investment demand, but high net-worth investors have traditionally been less sensitive to price changes during past cooling cycles, suggesting that the impact on home prices may be moderate rather than significant. As a result, property developers such as City Dev, and UOL may experience some downside pressure. On the other hand, Singapore’s largest real estate broker, Propnex, may stand to benefit from the government’s plans to ramp up mass-market and public housing volumes.

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