HTX DeepThink: Weakened Forward Guidance Fails to Soothe Market, Federal Reserve Credibility Becomes Core to Risk Asset Pricing

TechFlow news, July 31, HTX DeepThink columnist and HTX Research analyst Chloe (@ChloeTalk1) analyzed and pointed out that global risk assets continued to face pressure this week. Federal Reserve Chair Kevin Warsh attempted to weaken Forward Guidance for the first time, hoping to make market prices a more direct economic feedback mechanism. However, the market did not interpret the rise in long-term interest rates as a natural tightening of financial conditions, but rather interpreted it as a resurgence of inflation risks and a decline in Federal Reserve policy credibility. The 30-year US Treasury yield rose to 5.2%, the US dollar weakened and US stocks retreated, reflecting that investors are beginning to demand higher risk premiums rather than betting on an improvement in economic fundamentals.

The core contradiction in the current market has shifted from "whether to cut interest rates" to "whether the Federal Reserve still possesses the ability to control inflation". Although Warsh stated that market tightening of financial conditions has partially replaced interest rate hikes, he remained ambiguous on whether further rate hikes are needed, causing the market to begin doubting the Federal Reserve's policy execution capability in a high-inflation environment. Meanwhile, escalating US-Iran tensions have pushed up energy prices, further reinforcing inflation expectations, and also causing the probability of rate hikes in September and December to continue rising.

For US stocks, continued rising long-term interest rates mean that tech growth stocks still face valuation compression pressure. The core logic that previously drove the AI market rally was built upon low discount rates and high growth expectations, while continued rising risk-free rates will increase the discount rate for future cash flows, exerting pressure on high-valuation sectors. Therefore, before earnings are realized, AI, semiconductor, and high Beta tech stocks may still maintain a state of high volatility.

The crypto market is similarly affected by macro liquidity. Although mainstream assets such as BTC have not yet shown systemic risks, tightening US dollar liquidity and rising real interest rates usually suppress risk appetite, and capital is more inclined to flow into cash and short-duration assets. If the Federal Reserve ultimately chooses to rebuild policy credibility through rate hikes, the crypto market may continue to bear valuation pressure in the short term; conversely, once inflation is brought under control again, risk assets may usher in a new round of liquidity repair.

Overall, the focus of market trading is no longer on interest rates themselves, but on central bank credibility. In the coming weeks, inflation data, energy prices, and officials' speeches before the September FOMC will become key variables determining the direction of global risk assets.

Note: The content of this article is not investment advice, nor does it constitute an offer, solicitation of an offer, or recommendation for any investment products.