Investors in the stock market are currently on edge as they await crucial information from the Federal Reserve's policy meeting scheduled for July 29. Recent fluctuations in the market, including a significant drop of over 200 points in the VN-Index, have intensified focus on any signals regarding interest rates that could impact investor sentiment and international capital flows.

According to Nguyen The Minh, Director of the Investment Banking Division at An Binh Securities Company, the yield on 10-year U.S. Treasury bonds remains high, having recently reached its peak since 2025. This week, the market is expected to experience considerable volatility ahead of the Fed's interest rate decision. Currently, the market estimates a 36.3% probability of a 0.25 percentage point rate hike during this meeting, a significant increase from just 16% a week ago. Furthermore, the likelihood of a continued rate increase in September has risen to 81%.

One of the factors contributing to the unpredictability of the market is the new approach adopted by Fed Chairman Kevin Warsh. Unlike previous meetings, there have been fewer directional signals provided, as Warsh has emphasized a lack of commitment to forward guidance. This uncertainty means that market expectations must continuously adjust based on newly released economic data, with reports on inflation, employment, or consumer spending having the potential to dramatically alter monetary policy forecasts.

Reuters has noted that the July meeting is shaping up to be one of the most challenging to predict in years. Nguyen The Minh further explained that any changes in Fed policy will quickly ripple through to Vietnam via three main channels: exchange rates, foreign capital flows, and interest rates. If the U.S. dollar continues to strengthen following the Fed's decision, the Vietnamese dong may face increased pressure. Additionally, high yields on U.S. bonds could lead international investors to favor developed market assets over emerging markets like Vietnam, potentially prolonging the trend of net selling by foreign investors in the stock market.

Moreover, this pressure could also extend to domestic interest rates. As the economy requires significant capital to sustain growth, the banking system will continue to play a crucial role in providing long-term funding for businesses. If the Fed maintains a tight monetary policy while the U.S. dollar remains strong, interest rates in Vietnam are likely to stay elevated for longer than anticipated, directly impacting the stock market.