Powell’s Hawkish Stance Sends Treasury Yields and Dollar Higher

Insights: The article discusses how Fed Chair Powell’s comments signaling the central bank will keep interest rates higher for longer led to a rise in Treasury yields and the US dollar. This indicates the market expects more aggressive tightening.

Changes in Valuation Model: Higher interest rate assumptions should be incorporated into valuation models. Cash flow discount rates may need to increase to account for higher Treasury yields. Growth forecasts could be reduced amid tighter monetary policy.

Specific Assumptions Change: Increase terminal Fed Funds rate. Use higher 10-year Treasury yield as risk-free rate. Reduce GDP/earnings growth projections.

Short Recommendation: Powell’s hawkish stance is bearish for equities and supportive for the dollar. Recommend shorting high-duration growth stocks sensitive to interest rates. Favor defensives like healthcare and consumer staples. Stay long USD versus other major currencies.