Is the AI-Driven Bull Market Still in the Second Half? New Fed Chair Wash Abandons Forward Guidance, Suggests More Rate Hikes Later This Year

BlockBeats News, June 22nd, the new Federal Reserve Chair Kevin Wash is pushing for a fundamental shift in the monetary policy communication approach. The Fed's new head, appointed by Trump, advocates reducing market interventionist rhetoric and instead letting financial market pricing itself become the primary signal for guiding economic and inflation expectations, breaking the Fed's long-standing tradition of "forward guidance."

On the policy front, the Fed kept interest rates unchanged at the June meeting but has hinted at the possibility of further rate hikes later this year. In response, the 2-year Treasury yield climbed to around 4.177%, hitting a new high since February 2025. The current inflation rate remains above 4%, amidst a complex macroeconomic backdrop.

However, historical data shows that rate hikes do not necessarily mark the end of a bull market. In the five rate hike cycles since the 1990s, the S&P 500 index rose four times during such periods, with the 2015 to 2018 cycle seeing a surge of up to 19%.

The core support of this bull market remains the AI investment frenzy. As of the latest trading day, the S&P 500, Dow, and Nasdaq are all within 2.1% of their all-time highs. However, Societe Generale strategist Albert Edwards has warned that the current consumption growth heavily relies on a decrease in the savings rate rather than actual income growth, with real income already showing a year-on-year contraction. The market is largely dependent on the wealth effect sustained by asset price appreciation—a test awaits the bull market foundation once the AI-driven premium dries up.

Analysts generally believe that the era of Wash at the Fed signifies a higher volatility, less intervention market environment. Until the AI bubble bursts, this bull market may still have the second half to look forward to.