Are interest rate hikes always bad for the market? Hikes through this path are actually better | Shinhan Securities Dr. Kim Hyojin

Summary

Dr. Kim Hyojin discusses the outlook for US interest rates, arguing that although markets fear hikes, a gradual, well-communicated tightening cycle could be positive for equities. She highlights that inflation hurts lower-income groups more, so a rate hike may be justified on inequality grounds. She also sees US Treasury yields rising as rate hike expectations solidify, while a slow hike path could boost the S&P 500 once uncertainty is resolved.

• US rate hike fears are elevated but Bloomberg consensus still expects no hike in 2025 and cuts in 2026.
• Inflation remains far above the pre-pandemic trend, justifying a tighter stance.
• Polarization and inequality actually strengthen the case for rate hikes, as inflation disproportionately harms lower-income groups.
• A slow, well-telegraphed rate hike cycle has historically allowed equities to recover and trend higher.
• The worst outcome would be a delayed and then rapid hiking cycle; a early, gradual hike is market-friendly.
• US Treasury yields have been rising and may continue to do so as the market reprices a genuine tightening shift.
• The interview suggests watching for a Fed signal of gradual hikes, which could reduce uncertainty and support stocks.