While AI demand remains strong, Taiwan's export orders have also risen 71%. The report examines the factors cited as contributing to the decline in semiconductor stocks.
At the start of the year, 2 rate cuts were expected from US monetary policy, but that outlook collapsed as crude oil prices surged. Higher oil prices kept the PCE deflator elevated, prompting the Federal Reserve to scale back expectations for rate cuts. As a result, expectations for a rate hike later this year are once again spreading through the market.
The rise in crude oil prices is viewed as a factor intensifying inflationary pressure, strengthening expectations that the Federal Reserve will continue tightening monetary policy to avoid the risk of tolerating high inflation. If WTI exceeds $100, expectations for continued rate hikes are likely to dominate the market.
The Bank of Japan is expected to continue raising rates, with the underlying inflation rate assumed to remain above 2%. Given wage growth of nearly 3%, the Bank may continue raising rates once every 3–4 months through the end of 2027.
Corporate earnings prospects have improved substantially, while some observers say share prices remain undervalued. Earnings are expected to rise 45%, but share price performance is said to be lagging behind, and the report also highlights the 71% increase in Taiwan's export orders. Some observers believe other factors are also contributing to the decline in semiconductor stocks.