At present, the long-term returns of U.S. Treasuries have fallen for two days after a continuous rebound, but the risk appetite of global stock markets remains at a high level. What is the overall attitude of the market towards the Fed’s expectations, is this too optimistic? Dr. Zheng Lei, Deputy Dean of HKINERI, will analyse it for you.

Regarding the risk level of the global stock market, Dr. Zheng Lei believes that the current risk appetite is relatively high and cannot reflect the overall consensus of the market. Knowing that the U.S. stock market has been growing after the 2008 crisis, one of the main reasons is excessive liquidity. Among the funds flowing into the real economy, a considerable part is used by listed companies to buy their own stocks, thereby raising the stock price. At present, there is a certain amount of funds that continue to be used for this purpose through the unrestricted water discharge guaranteed by the Fed. Judging from the fundamentals of the U.S. economy, there are actually many negative voices. Whether the stock market shows excessive optimism or excessive speculation, Dr. Zheng believes that it is not easy to make a definite judgment.

Dr. Zheng believes that the Fed has given enough sincerity to support the real economy in the United States. Currently, the scope of debt purchases has been extended to small and medium-sized enterprises in the United States, and this amount can continue to increase. As for what other "cards" the Fed can play? Dr. Zheng believes that there is no need for the Fed to take more powerful easing measures.

Insiders believe that in order to promote bank lending, the Fed will use the spread curve to control this tool. Dr. Zheng believes that as long as the Fed buys enough debts of SMEs, it can allow the funds to flow into SMEs continuously, and in this way there is no need to use tools that use spreads to control. This is actually human intervention — injecting credit funds into SMEs through the hands of commercial banks.

After the Fed's decision, Dr. Zheng believes that this resolution will not have too many measures worthy of attention, and may not have an impact on my country's monetary policy in the second half of the year. It is because China’s fiscal and economic policies have been confirmed by the two sessions and will not change much because of the Fed’s resolution, so the central bank may not make major moves.