On January 27, 2022, the Federal Reserve's interest rate meeting conveyed the expectation that it would soon start raising interest rates ("an increase in policy interest rate would soon be approved"), and made it clear that assuming appropriate conditions, it planned to raise the federal funds rate at the March meeting. The tone of the meeting was relatively hawkish. According to the data of fedwatch, the probability of raising interest rates five times in 2022 is 32.6%; Before and after the meeting, the probability of raising interest rates three times in the first half of 2022 jumped from 41.11% to 60.85%; In September 2022, the probability of interest rate rising to 100-125bp increased from 27.55% to 41.03%, and the rhythm of interest rate increase slightly exceeded market expectations. At the same time, the meeting made it clear that the table reduction will be started after the interest rate increase process, but no decision has been made on the specific timing, pace or other details of the table reduction.
At present, the monetary cycle of China and the United States is misplaced, the United States has started the interest rate increase cycle, and China insists on "focusing on me". The risk-free yield spread between China and the United States has continued to narrow since December last year. We expect that the shrinking interest rate gap between China and the United States will narrow the operating space of the central bank's monetary policy. The variables that exceed expectations in the future may exist in: 1) there may be a simultaneous correction of China US risk-free return similar to q1-q3 in 2016. 2) China's lower inflation rate than that of the United States has reserved space for further relaxation of monetary policy and a wide monetary period.
Looking back at the performance of major indexes in China and the United States, it is found that the rise of the stock market in 2020 is mainly driven by valuation, and the price earnings ratio of TTM of major indexes accelerated upward in 2020. After entering 2021, the PE level began to recover to the level before and after the epidemic. It can be seen that the stock price support in 2021 is more from the fundamentals, and the profit situation becomes better. The opening of the interest rate hike cycle in the United States will affect the liquidity of A-Shares by affecting the cost of funds for northward trading. The data show that there has been no significant net outflow of northward funds in the past three months. At the same time, the funds in the past month have flowed to the sectors with low early valuation, including the banking industry directly benefiting from the interest rate cut, the real estate industry with improved marginal credit, and the building materials industry with steady growth, which shows that the valuation of A-Shares is high and cost-effective, which is still attractive.
The essence of the Ukrainian incident is a dispute over the interests of Russia and the United States. The two sides are likely to be deadlocked for a long time, but the possibility of war cannot be ruled out. We expect that this risk event will have a negative impact on the oil output of Russia, an energy power, to Europe, supporting the rise of oil prices. At the same time, geopolitical tensions will also reduce the risk appetite of global investors.
In the current period (January 26), the risk premium of A-Shares was 0.77%, 0.17% higher than that in the previous period. The overall profitability of A-Shares improved significantly, PE continued to revise downward, and the yield of 10-year Treasury bonds was 2.70% in the current period, which continued to maintain the investment value of A-share risk premium.
In the current period, semiconductor erp-0.92%, with a change of 0.11% compared with the previous period, which is in the highest allocation range of risk premium; Pharmaceutical and biological erp0 60%, 0.34% higher than the previous period, in the allocation range with high risk premium; The national defense and military industry erp-1.05%, 0.14% higher than the previous period, is in the neutral normal allocation range of risk premium. In terms of large and medium cap rotation, the price ratio of Shanghai Stock Exchange 50 to China Stock Exchange 500 generally showed a downward trend from 1.13 in mid February to the end of April this year, and continued to show a downward trend after a short recovery in May. The ratio in this period increased from 0.810 in the previous period to 0.844. The mid market continued to show strength over the market. In terms of large and small disk rotation, the price ratio between CSI 300 and Guozheng 2000 has generally shown a downward trend since mid February (this year's high of 0.85). After a short recovery in May, it has continued to show a downward trend, and the ratio in this period has increased from 0.501 in the previous period to 0.534. Small cap continues to be stronger than the overall trend.
In the current period, the dividend yield of Wande quana changed from 1.48% in the previous period to 1.53% in the current period. The ten-year Treasury bond yield Wande quana dividend yield was 1.183%, and the distance from the warning value of 2.5% (the highest point of the bull market in the past) changed from 124.54bp in the previous period to 131.70bp in the current period. The dividend yield of SSE 50 changed from 1.48% in the previous period to 1.54% in the current period. The yield of ten-year Treasury bonds - the dividend yield of SSE 50 was 0.07%, and the distance from the warning value of 1.1% changed from 98.75bp in the previous period to 102.89bp in the current period. The dividend yield of Shanghai and Shenzhen 300 changed from 2.62% in the previous period to 2.64% in the current period. The yield of ten-year Treasury bonds - the dividend yield of Shanghai and Shenzhen 300 was 0.7043%, and the distance from the warning value of 1.8% changed from 104.83bp in the previous period to 109.57bp in the current period. The dividend yield of China Securities 500 changed from 1.98% in the previous period to 2.01% in the current period. The yield of ten-year Treasury bonds - the dividend yield of China Securities 500 was 1.1741%, and the distance from the warning value of 3% changed from 175.13bp in the previous period to 182.59bp in the current period.
Risk tips: overseas policy risk, geopolitical risk
