(Bloomberg) -- From favoring Asian stocks and quality small-cap shares to betting on flatter yield curves, strategists are mapping out their best trade ideas after Federal Reserve Chair Jerome Powell set the stage for raising interest rates to combat the highest inflation since 1982. 

Some warned of further volatility ahead for global equities, especially high-priced technology shares, while others called for a stronger dollar and higher bond yields. U.S. stocks surrendered gains and Treasury yields surged as markets perceived Powell’s comments as hawkish.

Here are selected comments on what’s next for global markets following the Fed:

Favor Value Shares

“We look for market interest rates and equities to stabilize on the Fed news,” said John Lynch, chief investment officer for Comerica Wealth Management. “Oversold conditions have been present in many respects, and we expect global cyclical recovery and gradually higher rates to be supportive of value, quality (profitable) small caps, and cyclical sectors including energy, financials, industrials and materials.”

“Inflation-adjusted (real) rates will likely remain negative in 2022, enabling equity investors to discount record profits, growing at slightly better than historically average rates, near historic lows. Profit growth in the range of 8.0% to 10.0% should guide the S&P 500’s march toward our fair value estimate of 5,000 for the index by year end.”

Seek Shelter in Asia

“The better monetary backdrop in Asia could overall support Asian equities” even as the expensive loss-making growth stocks will remain “vulnerable as their valuations could be hit by higher rates,” Jian Shi Cortesi, a portfolio manager at GAM Investment Management in Zurich said in emailed comments. “The inflation pressure is lower in many Asia markets, and interest rate will not need to be hiked as much as in the U.S.”

Higher Yields, Flatter Curves

“Today’s Fed meeting reinforces our bias for higher U.S. yields, a flatter curve and stronger U.S. dollar. The statement and particularly Powell’s presser were quite hawkish: opening the door to 50-bp hikes and possibly hiking at every meeting,” Wells Fargo strategists including Mike Schumacher wrote in a note. “Given today’s hawkish surprise from the Fed, more curve flattening and USD strength seems in store in the near term.”

“Fed funds futures price 31bps for March. Fade it. In our opinion, this is too much tightening, too soon. Instead, position for the market to price more tightening through May.”

Dollar Bullish

“Rising Treasury yields make it hard to find an excuse to look anywhere but the dollar in FX markets,” said Simon Harvey, head of FX analysis at Monex Europe. “Despite being fairly noncommittal for the remainder of the press conference with regards to the timing, pace and impact of quantitative tightening, the damage has already been done in financial markets due to the commentary suggesting a steeper rate path relative to that of four rate hikes this year prior to the meeting in what was meant to be one of the plainer sailing Fed meetings.”

‘Less Bearish’ for Stocks

“Today’s Fed statement was largely as expected. Interest rate hikes are coming, and we expect a hike in March 2022,” Jason Schenker, president of Prestige Economics, wrote in a note. “This is less bearish for equity markets than some had feared.”

“Fed rate hikes are coming, but the Fed is likely to take a measured approach to avoid sharp market declines in equity and home prices. Nevertheless, a rise in interest rates is supportive of the greenback and bearish for bond markets.”

Brace for Volatility

“The stock market is especially vulnerable to higher rates and the removal of the tailwind that the Fed’s asset purchases have provided for the past two years,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance wrote in a note. “We believe the economy will stay out of recession and the bull market in stocks will continue this year, but we are concerned that the volatility we have already witnessed this month will increase in the months ahead and would exercises caution in the near term.”

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