Soochow Securities released a research report stating that the Federal Reserve's policy meeting conveyed hawkish signals, coupled with a further escalation of conflict between the U.S. and Iran, leading to an accelerated decline in U.S. stocks. In the short term, the firm believes the Fed's decisions signal a temporary end to the "era of easing." The global central bank week has concluded, and market expectations for Fed rate cuts have largely vanished. This marks the first time since the Fed entered its easing cycle post-2024 that the market is no longer pricing in rate cuts for the coming quarters. A shift in global macro policy is occurring, moving from "rate cut expectations" to "pricing in rate hikes." If there is no substantial positive development in geopolitics next week, U.S. stocks may test lower support levels. The main views of Soochow Securities are as follows:
Market review for the week (March 16, 2026 - March 20, 2026): Developed markets led the decline (-2.0%), while emerging markets fell (-0.4%). U.S. Stocks: The Dow Jones Industrial Average led the losses this week, down 2.1%, the Nasdaq fell 2.1%, and the S&P 500 dropped 1.9%. By sector, energy and financials gained, while materials and utilities led the declines. The proportion of S&P 500 constituent stocks that rose was 32%, a marginal increase from the previous week. Leading gainers included APA Corp., Baker Hughes, Halliburton, Delta Air Lines, and Western Digital.
The Fed's policy meeting released hawkish signals, combined with a further escalation of U.S.-Iran conflict, accelerating the decline in U.S. stocks. Specifically: First, the Fed held rates steady but struck a hawkish tone. The Fed's March meeting kept interest rates unchanged, matching expectations. The dot plot largely maintained the policy guidance from December of the previous year, indicating one rate cut within the year, but more voters showed hawkish tendencies (particularly noting that Waller no longer objected to holding rates steady). For the future economic outlook, projections for economic growth and inflation were revised upwards, while the assessment of the unemployment rate remained unchanged. The focus of this meeting was the press conference, where, against the backdrop of rising oil prices, Powell maintained a cautious yet hawkish stance. He stated that the impact of developments in the Middle East remains unclear and it is too early to make economic judgments based on them. Regarding inflation, he indicated the current situation is not the stagflation of the 1970s, most long-term inflation expectations are stable, energy supply shocks are one-off, and some oil price impacts are reflected in core inflation. On interest rates, he stated that the Fed will not cut rates until more progress is made on inflation and did not rule out the possibility of future rate hikes, although a hike currently remains a low-probability event. Second, the U.S.-Iran conflict escalated. The geopolitical conflict significantly intensified, with strikes expanding from military targets to energy infrastructure in the Gulf. Israel launched an attack on Iran's South Pars gas field, affecting Qatari liquefied natural gas facilities and causing a large fire; Iran characterized this escalation as the "war entering a new stage," declaring oil facilities in three Gulf states as legitimate targets, escalating the conflict to core energy regions. The Trump administration publicly distanced itself from Israel's unilateral actions; simultaneously, the U.S. considered sending several thousand additional troops to the Middle East, including air and naval forces to escort tankers through the Strait of Hormuz. On the energy supply front, Saudi Arabia has already rerouted oil to the Red Sea port of Yanbu, with daily exports recovering to approximately 4.19 million barrels, indicating initial success for the contingency rerouting plan. Although geopolitical tensions cooled slightly on Friday after the escalation involving energy attacks—for instance, Trump asked Israel to "pause" subsequent strikes on Iranian gas fields, distanced the U.S. from the South Pars attack, and planned a second release of strategic petroleum reserves to curb high energy prices—the conflict remains highly intense. The attack on Qatar's Ras Laffan base is expected to significantly reduce LNG export capacity, and the traditional energy security buffer in the Gulf region continues to be challenged.
Outlook: In the short term, the firm believes the Fed's decisions signal a temporary end to the "era of easing." The global central bank week has concluded, and market expectations for Fed rate cuts have largely vanished. This marks the first time since the Fed entered its easing cycle post-2024 that the market is no longer pricing in rate cuts for the coming quarters. A shift in global macro policy is occurring, moving from "rate cut expectations" to "pricing in rate hikes." Although expectations have contracted sharply, the Fed remains the only central bank among the G10 where market pricing still retains a "very faint" possibility of rate cuts. In contrast, expectations for rate hikes from the ECB and the Bank of England have increased significantly. The core reason for the Fed becoming so "resolute" lies in the estimated 3-5 years required to repair the damaged Qatari LNG facilities. This prolonged increase in energy costs locks in a path for slower disinflation, forcing the Fed to shift its focus from employment to inflation, thereby increasing the difficulty of implementing rate cuts. Furthermore, following large-scale清算 on Friday's "quadruple witching day," the market will enter a policy vacuum. If there is no substantial positive development in geopolitics next week, U.S. stocks may test lower support levels.
Key data and events to focus on next week: On the fundamental side: 1) March 24: Japan's February CPI year-on-year, Eurozone March Manufacturing PMI Flash; 2) March 26: U.S. Initial Jobless Claims for the week ending March 21 (in thousands). On the earnings front: 1) March 25: Annual reports from Kingsoft Cloud and Zhihu-W; 2) March 26: Annual report from Pony.ai.
Risk warnings: The U.S. economy falls into rapid recession, Fed policy exceeds expectations, global geopolitical risks exceed expectations, volatility in Trump administration policies, historical experience may not indicate future performance, risks associated with data statistics and estimation errors.
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