Configuration strategy selection in December 2021

Report summary [:

For the configuration direction in December, the core focus is on the following four aspects

1. Traditional industries will face supply-demand mismatch in the foreseeable future: they will become the source of long-term gross profit margin improvement. In the process of "energy transformation", the transformation and substitution of society's demand for the traditional world is not a simple relationship of competition and destruction. They may achieve each other and develop together. Even the construction of new energy will bring new demand for traditional industries: the energy transformation has obvious new demand for traditional aluminum, soda ash, silver and even steel, This is already very impressive in the context of possible negative growth in supply. Finally, the mismatch between supply and demand development will inevitably enhance the price center of traditional commodities. In the future, we will see the synchronous rise of "carbon price" and the profit margin of traditional industries.

2. Cyclical stocks vs commodities: supply driven "paradigm shift". In the past demand driven economic cycle, the classic performance of the "quasi stagflation" period was that cyclical stocks led commodities and peaked about four months. But now, we see an obvious difference: the price rise is more driven by supply, and the current economic slowdown is mainly due to the tightening of regulation on real estate, carbon emissions and technology industries. With the support of external demand, China has obtained a time window with less pressure on steady growth, and the policy focus has gradually shifted to promoting reform and structural adjustment. With the increasing downward pressure on the economy, the demand for steady growth in the future is increasing, This means that the policy may return to loose (stable money + wide Finance + wide credit). The characteristics of the supply driven "stagflation bull" in the United States in the 1970s, which is more similar to the current environment, are that most cyclical stock prices lag behind the peak of cyclical commodities and may outperform commodities periodically (generally concentrated in the range of cyclical commodity shocks).

3. In this round of "stagflation like" environment, inflation elasticity is greater than economic elasticity. The current "quasi stagflation" of "falling economic demand + rising PPI + mild policy environment" is different from any kind of stagflation caused by active policy tightening in history: compared with the economic growth and overall inflation that fell from a high level in the previous two "quasi stagflation", it is now in the "low" economic growth range, and some demand indicators have reached the "recession" level, Combined with the current inflation dominated by PPI, this round of policies may focus more on economic growth. There may be a scenario of "secondary stabilization and recovery" rather than "secondary recession" after the epidemic in the future. In the future, the earnings of cyclical stocks may usher in a second recovery before they fall. This is the essential difference between cost driven inflation and "stagflation like" in the past.

4. Focus on "double carbon" and power layout. Specifically, it mainly includes the following three aspects: first, the layout around the source of tight supply; Second, traditional industries with long-term gross profit margin; Third, the new energy sector enjoying long-term capacity growth. In addition, in order to cope with the inflation environment, dividend investment proved to be an important anti inflation force in the "stagflation" in the 1970s, and even outperformed the upward inflation by a large margin.

 

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