research conclusion
In the face of the upcoming 2022, there are signs that the market's vigilance against stagflation and the expectation that the Fed will enter the interest rate increase channel are strengthening, which have become two key clues for the current global macro and asset allocation outlook in 2022. Its confirmation or falsification may ultimately determine the interpretation direction and path of subsequent overseas macro and markets. In the overseas macro outlook for 2022, we did not use these consistent expectations as the basis for drawing the blueprint, but re explored the current significantly included interest rate increase expectation, the prediction of the trend of inflation, the key macro index, and the estimation of the macro impact of the new variable - the trend of the great infrastructure policy through independent research. On the basis of grasping the above focus issues, we can re-examine the discussion of "stagnation" and "inflation", and then form a more accurate and reliable judgment on the overseas macro economy in 2022.
"Inflation" and monetary policy choice: historical experience shows that the formation of consistent expectation of interest rate increase may be different from the number of points when the boots of interest rate increase land. Therefore, the so-called consistent policy expectation can not be used as the cornerstone of macro and market prediction. The continued high inflation in 2021 is the underlying logic that supports the market's expectation of raising interest rates. We predict that U.S. inflation may show a trend of high before low in 2022. At present, the year-on-year growth rate of CPI may be close to the peak. After the inflation center enters the downward channel, even if the absolute level of inflation growth still exceeds the policy target level, the impact of inflation on the monetary policy decision of the Federal Reserve may be weakened. In other words, the inflation trend from high to low may not be conducive to the Fed's decision to raise interest rates at a later time node in 2022. We believe that compared with the consensus expectation judgment of the market, the Fed's interest rate increase process in 2022 may be backward or forward.
"Stagnation" and macro impact of large fiscal cycle: compared with "inflation", we are not too worried about the risk of "stagnation" of economic recovery. Service consumption, which accounts for a higher proportion in the economic structure of Europe and the United States, has not yet returned to the pre epidemic level. It is expected that overseas service consumption will continue to repair steadily in 2022. With the continuation of the big fiscal policy cycle, investment growth driven by public infrastructure investment may become an incremental contribution to overseas economic fundamentals. Looking forward to 2022, for overseas countries, although the downward growth rate of commodity consumption has been a relatively certain trend, there is still considerable room for repair of large service consumption. At the same time, on the investment side, due to the launch of a new round of large fiscal policies, there is a relatively certain incremental pull in infrastructure investment and other fields that needs attention. U.S. economic growth is expected to continue at a level higher than the historical growth center.
Asset Pricing in current market and possible correction direction——
1) We believe that the current performance of U.S. stocks has actually reflected the expectation of interest rate increase. If the actual time and path of interest rate increase in 2022 deviate from the current consensus expectation, the valuation pressure of the U.S. stock market will be relieved under the post interest rate increase scenario we deduced.
2) We have observed that since the epidemic, the marginal change of monetary policy has always been the necessary driver driving the continuous and trend change of interest rate level. In the absence of significant changes in monetary policy, there is limited room for the interest rate level to go up / down. Therefore, we believe that whether the Fed will raise interest rates in 2022 may not only determine the change range of US bond yields, but also affect the direction of yields.
3) The strength of the US dollar and the weakness of emerging market stock markets and exchange rates jointly confirm the market's judgment that the Fed's monetary policy will be relatively tighter in the future. We believe that the strong dollar expectation will also become one of the mainstream forecasts vulnerable to challenges in 2022.
4) There is an obvious negative correlation between gold price and real interest rate. If monetary policy is actually more relaxed than market expectations, gold still has a relatively certain allocation value in an environment where the absolute level of inflation is still high.
Risk statement
The risk that the magnitude and duration of US inflation exceed expectations; The variation of covid-19 epidemic strain causes new impact risk to economic repair; The change of assumptions affects the risk of measuring the effect of fiscal policy.
