AI-Driven Markets Resist Interest Rate Hikes

The US Treasury bond rate has surged to above 5% for the first time in over 20 years, with the 10-year benchmark exceeding $1.02 trillion. This marks a significant shift from the era of low interest rates following the financial crisis and COVID-19 pandemic.

Analysts say that despite the high interest rates, the stock market and price sector are not severely affected. Instead, they point to the accelerating investment in artificial intelligence (AI) as a key factor in this trend.

Samuel Martinez, portfolio manager at Vanguard, notes that market participants are preparing for multiple rate hikes as central banks focus on inflation control. The US Federal Reserve is likely to raise interest rates again next month, with a 64.2% probability of a rate hike according to the Chicago Mercantile Exchange (CME) FedWatch.

Some analysts warn that high interest rates may not be sufficient to dampen energy demand and inflation, particularly in the era of AI-driven investment. Bill Ackman, chairman of Pershing Square, predicts that the Fed's rate hike could lead to greater inflation, citing the possibility of a vicious cycle of repeated rate hikes.