CITIC Securities: Recent market sensitivity to the narrative of interest rate hikes is not necessarily indicative of an actual imminent rate increase.

CITIC Securities pointed out that the recent macro environment is not conducive to a rate cut narrative but the rate cut window has not been completely closed. Three key points to watch: In June, if the US stock market and US bonds hit new lows again, it may accelerate negotiations between the US and Iran and the reopening of the Strait of Hormuz. If oil prices fall, the premise for a rate hike may loosen. In the third quarter, the key to interpreting employment data lies in inflation rather than the data itself. As long as the core CPI remains stable, the hope for a rate cut will not completely disappear. In the second half of the year, in a scenario of K-shaped differentiation, if consumption continues to stagnate and the Fed's demand for employment is not satisfied with just a stabilization of the unemployment rate but requires a more significant decrease, a rate cut remains a potential option. Currently, the pricing trend for a rate hike has reached its peak and the direction for the second half of the year is more likely to be towards easing. In addition, the market is currently very sensitive to the rate hike narrative, not because there is a real need to hike rates, but because US stocks are overvalued. Once the correction is complete and emotions ease, the rate hike narrative may fade away.