During the Spring Festival holiday, the performance of major markets around the world fluctuated. Among them, Hong Kong stocks led the rise, and many industries such as automobile, durable consumption, retail and finance made full efforts. The Hang Seng Index rose 4.34% for the whole week. The bright performance of the Hong Kong stock market also makes many investors begin to expect a warm sun after the A-share Festival.
In addition, the three major U.S. stock indexes all recorded gains this week. Amazon and snapchat’s share price soared after they reported earnings. The US non farm payrolls increased by 467000 in January, far exceeding expectations, driving bond yields soaring and strengthening the market expectation that the Fed will raise interest rates as early as March.
The following figure shows the performance of major global assets during the Spring Festival.
the volatility of US technology stocks was significantly enlarged
Boosted by the bright performance of Amazon’s financial report, US technology stocks rebounded collectively on Friday, and the three major indexes of US stocks continued to rise throughout the week. However, it is worth noting that since this week, the intraday amplitude of U.S. technology stocks such as meta, paypal and snap has been huge. Among them, meta platforms (formerly Facebook) has fallen by 21% this week, the largest weekly decline since its listing.
Market participants believe that, on the one hand, this reflects that the financial performance of the above-mentioned technology stocks is beyond investors’ expectations. On the other hand, it also implies that the intraday liquidity of US stocks is weakened, making it more difficult for large trading orders of stocks to be traded.
Goldman Sachs strategist Fisher Mann said weak liquidity could amplify market volatility. Over the past two weeks, the price difference between buying and selling e-mini S & P 500 index futures has frequently reached 50 cents, twice the usual 25 cent spread in the normal market. E-mini S & P 500 index futures are often used as a hot tool to bet on the future trend of US stocks.
While meta platforms fell sharply, Amazon closed up 13.5% on Friday, the largest one-day increase since 2015, with a transaction of US $39.7 billion. Its market value increased by nearly $191 billion, the largest single day increase in stock market value in the U.S. market. On the news front, the technology giant’s financial report released on Thursday showed strong performance of its cloud computing department.
In addition, Tesla closed up 3.6% on Friday, with a turnover of $22.4 billion. Morgan Stanley analysts expect Tesla‘s revenue to exceed that of GM and Ford combined by 2027.
in the Fed’s interest rate hike cycle
how does the market usually behave?
However, for the US stock market and even the global market, the follow-up will still face the test related to the interest rate increase process. Driven by the strong non-agricultural data, the yield of weekly 50-year US bonds rose 10 basis points to above 1.9%, which is also a new high since the end of 2019.
Earlier, on February 3, the Bank of England had announced that it would raise the benchmark interest rate by 25 basis points to 0.50%, and planned to completely end the purchase of corporate bonds.
As US inflation remains high and the Fed gradually turns from dove to Eagle, the market is increasingly concerned about whether the tightening policy of the Fed will have a huge impact on the stock market and how long the impact will last.
China Securities Co.Ltd(601066) the securities resumed the performance of assets in the latest interest rate increase cycle.
Specifically, in the expected stage of raising interest rates (January November 2015), the market tends to respond in advance due to concerns about uncertainty, and the Fed’s signal of raising interest rates alleviates the panic of the market to a certain extent; The first interest rate hike (December 2015) had the greatest impact on the global stock market, and the response of emerging markets and A-Shares was more violent; After continuous interest rate hikes (from December 2016), with economic recovery as the fundamental support, the response of the global stock market tends to be flat and does not change the long-term trend.
China Securities Co.Ltd(601066) Securities said that in terms of style, different from the usual cognition, on the whole, during the Fed’s interest rate increase and contraction, especially in the expected stage, the growth style showed a bright performance, and the prosperity of the industry itself became the baton of capital flow and a powerful weapon against the pessimistic expectations of the market; When the interest rate hike is implemented and the table contraction is accelerated, the market liquidity may be substantially affected, and the growth stocks may be adjusted in the medium and short term, but it is unlikely to fall quickly and then collapse.
in conclusion, in the nearly three interest rate hike cycles, the next day after the Fed officially raised interest rates, US stocks and emerging market stock markets usually fell;
within one month after the interest rate increase, the decline of US stocks, especially the Nasdaq, may be more obvious, the decline in emerging markets is slightly smaller than that of US stocks, and the US dollar index is relatively weak;
within three months after the interest rate increase, the decline of US stocks may further expand. If the debt reduction accelerates during the period, growth stocks may lose value stocks.
In the whole interest rate hike cycle, the yield of US bonds has increased significantly, but monetary policy may not be the leading factor. The three major indexes of US stocks and emerging market stock markets have not experienced a long-term recession, and may even rise due to the support of positive factors such as economic recovery.
how to get A-Shares after the festival?
In the face of the rebound in major global markets during the Lunar New Year holiday, the majority of investors are most concerned about the trend of A-Shares after the beginning of the year.
Gf Securities Co.Ltd(000776) Dai Kang, chief strategist, believes that the market style will move from “market value sinking” to “market value equilibrium” in 2022: the pressure of profit decline of large cap stocks in 2022 is less, but the valuation quantile is still on the high side since 2010; The valuation of small cap stocks is more dominant, but they face great pressure of performance decline in 2022. Therefore, it is judged that the market style in 2022 will be more balanced than that in 2021.
Li qiusuo, executive general manager and strategic analyst of China International Capital Corporation Limited(601995) research department, said that the opportunities of A-Shares are expected to outweigh the risks in 2022. 2022 is the “afterwave” period after the great impact of the epidemic, and the growth and policy cycle at home and abroad are reversed again. Although there is still a lot of uncertainty and the market path may still have twists and turns, China’s policies are loosening, growth is gradually improving, the overall market valuation is not high, and the market environment is gradually favorable. The focus is to grasp phased and structural opportunities according to the changes of the main contradictions in the market.
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