How will US market react to the 25 bps hike? Adrian Mowat explains

economictimes.indiatimes.com:

«I think it is going to be fine for the markets because the backdrop is a robust US consumer and a corporate sector in the United States that is generating good profits,» says Adrian Mowat, EM-Equity Strategist.What is the weather looking like for US equities given that it is a 25 bps hike that is something which was anticipated? But another hike in the offing, how do you think the markets are going to perceive that?I think it is going to be fine for the markets because the backdrop is a robust US consumer and a corporate sector in the United States that is generating good profits. We had very good numbers out of Meta, the owner of Facebook, this week. So we have got a story here where the top line is a bit better than people were expecting and the corporate sector in the US has been very good at maintaining margins.

And I think it is that micro fundamental that is driving the market higher. So the Fed has got an interesting situation here, we have taken rates up dramatically but remember, we have been taking them up from a zero level and that was a dramatic response to a pandemic. And so I would not sort of overstate this we have moved by 5.25.

I would say really if we were at neutral, we would maybe moved by 200 bps. So I think the Fed is probably in a good position where they will be able to maintain rates at this high level. The economy's resilience will continue and I think where there is going to be a surprise in the market is going to be in interest rate expectations.