Soaring Oil Prices and Interest Rates: Is a Rate Hike the Only Answer?

The main reason for the sharp rise in the 10-year Treasury yield from 3.92% to 4.9% compared to last month is also analyzed as rising oil prices. Moving forward, inflation indicators are expected to be the benchmark for determining whether energy price fluctuations penetrate into consumer prices.

Core inflation is calculated by excluding volatile items such as energy and agricultural products from the Consumer Price Index. The Fed uses core inflation to determine whether temporary price changes are consistently transmitted to other prices, such as service prices. Currently, core inflation remains at a 0.2% level month-over-month, suggesting that the Fed may have room to freeze interest rate hikes.

While an interest rate hike currently could negatively impact the economy, it is necessary to prepare for unexpected risks such as intensifying warfare. Preemptively raising interest rates to minimize damage from rising oil prices is an effective way to reduce market shock. With the probability of an interest rate hike already exceeding 70%, the market seems to be taking the Fed's decision as a given.

Conflicting remarks from key figures in the Trump administration, such as Secretary of State Rubio and JD Vance, expose a lack of policy unity. They advocate for expansionary fiscal policies, such as a $5 per person payment, which could fuel inflation and increase interest rate hike factors. The difficulty in finding signs that Trump is strategically communicating with the market also contributes to uncertainty.

With only one month until the election, the Fed's strategic judgment is crucial. While raising interest rates at this difficult time may not be the best option, it could be the second-best, according to analysis. Such a decision could contribute to reducing market volatility.

Given the market's distrust after the interest rate freeze in July, there are concerns that the Fed's credibility could further erode if rates are not raised again. As the Fed previously promised a conditional hike, now is considered an opportune time to fulfill that promise and restore the trust of former Fed Governor Kevin Warsh.

In the last Jackson Hole speech, the Fed indicated oil price stability as a condition for an interest rate hike. With oil prices currently continuing to rise, the conditions for a hike have been met. There is an opinion that the Fed needs to act to resolve market anxiety.

From Kevin Warsh's perspective, to secure market confidence, it is crucial to exercise independent judgment without being swayed by Trump's remarks. Analysis suggests that it is time for the Fed to focus on building market confidence, free from political pressure.

While big tech companies may be relatively robust, other companies within the same ecosystem could be hit by rate hikes. This could lead to sluggish stock prices in the short term.

Past rate hikes that crashed markets were mostly due to strong demand and a robust economy, which gave the hikes sustainability. The current rate hike is different in nature from past ones, and the Fed must avoid repeating past misjudgments, such as the dot-com bubble collapse in the early 2000s and the period of the war in Ukraine.

Proactive measures can reduce the damage from interest rate hikes. This benchmark rate hike is not driven by demand but by a supply-side war, so it is unlikely to have continuity. Therefore, instead of sharp hikes like past big steps, a moderation in pace is possible. This is not expected to be a variable that drastically changes the index's direction.

While market volatility is anticipated in September, a positive outlook for the October market remains. If the Fed continues its efforts to build market confidence, there will be no significant change in the market's direction after October.

The recent shift in terminology and perception from AI to AGI (Artificial General Intelligence) is significant. The emergence of Astra is the first step in this AI technology paradigm shift, and its repercussions are expected to be considerable. This could trigger an investment race among competitors for GPUs.

As exemplified by NVIDIA CEO Jensen Huang's case of training 100,000 GPUs, the high performance of new technologies can cause serious reconsideration of existing technologies.

The pace of AI performance improvement is accelerating to the point where even engineers are experiencing its risks. Some raise concerns about AI thinking for itself and warn that security issues will become increasingly significant. There is a need to reflect on whether the general public is underestimating the potential dangers of AI too much.

There are past instances where AGI-related stocks maintained an upward trend even at interest rates of 4.7% to 4.8%. Viewers should not solely focus on Astra's technical performance being better than Fable, but rather pay attention to core technological changes such as learning methods and changes in hardware demand.

The exchange rate's decline from 1,500 won to 1,350 won could lower third-quarter corporate earnings expectations. This affects not only semiconductors but also the recent decline in cosmetic stock prices and leads to a potential slowdown in demand for luxury goods. However, this exchange rate impact is a temporary phenomenon and should be interpreted as an adjustment in earnings expectations rather than a shift in market direction.

In the stock market, understanding 'why' prices rise and fall is more important than simply knowing 'if' they rise or fall. Information that everyone knows, like exchange rates, tends to be already reflected in market performance. Understanding the reasons for market fluctuations allows for agile responses to changing situations, and analyzing market direction beyond short-term numerical changes is key.