the tone of the central economic work conference is very optimistic. Since 2014 and 2018, it has again emphasized “taking economic construction as the center” and “stability” has become the most important keyword. Compared with 2015 and 2019, the stock market has abundant liquidity in the year after steady growth, but the profit will continue to decline for a long time. We judge that the tone of steady growth this time will make the index break through again. Due to the good policies, funds and emotions, the probability of this breakthrough is greater. If we can see that residents’ funds and credit exceed expectations in January, the cross year market can last until March. After the new year’s market, it is appropriate to turn to defense, and steady growth can raise the valuation in the quarter, but it will take a long time to change the profit trend.
(1) with stability at the forefront, economic construction is as important as 2014 and 2018. the central economic work conference has firmly taken the lead and established the importance of steady growth in 2022. Steady growth is a very important policy hotspot for most of 2022. In history, there have been many lasting recovery of steady growth heat, namely, from November 2011 to December 2012, from March 2014 to June 2015, and from July 2018 to March 2020. Generally, each recovery lasts for more than one year, mostly from the middle of the economic decline to the recovery period. This time, the importance of steady growth has increased, and the corresponding policy implementation and market attention may be maintained for about one year.
Compared with the central economic work conference over the years, this time “adhering to economic construction as the center is the requirement of the party’s basic line” was added again. The previous two times mentioned that taking economic construction as the center were 2014 and 2018, both of which were in the profit decline cycle of A-share listed companies. Subsequently, in 2015 and 2019, the stock market experienced a decline in earnings, but the valuation increased, and most of them raised the valuation first, and then reflected the decline in earnings. Overall, in the year of steady growth, the stock market fluctuated violently due to the conflict between profit and liquidity.
(2) the cross year market is getting better and better. due to the economic downturn, finance, real estate chain, consumption and other sectors closely related to the macro economy have made major adjustments successively. According to more optimistic assumptions, steady growth may have a positive impact on the market for about one quarter. This cross year market, in the most optimistic case, can have three stages. The first stage is “valuation rebound”. Since March, the adjustment time and amplitude of some sectors are large. There is a need for valuation repair, which has been fulfilled at present. The second stage is “steady growth”. Starting from the reduction of reserve requirement, it is expected to last until January, and the cross-year market is getting better and better.
This steady growth will also push the index into the critical point of breaking through again, which will be the fourth time this year. The three breakthroughs in February, June and September ended in failure, and the index has not been able to get rid of the range shock. Last week, the land stock connect went north to buy funds sharply, indicating that the allocation funds began to increase at the end of the year. If the additional allocation of equity assets by Chinese residents’ funds can be observed within the next month, the probability of breakthrough will increase significantly. We think the probability is still very high, especially under the background of steady growth expectation.
(3) after the cross-year market is completed, we should take appropriate defense, because it takes time for steady growth to produce results. according to the experience in 2014 and 2018, steady growth can raise the market valuation stage by stage, but it takes a long time to reverse the downward trend of profitability. The important reason behind this is that the steady growth after 2014 is smaller than that in 2008 and 2012, and the steady growth is mainly stable. After the steady growth in 2014 and 2018, the growth rate of infrastructure investment has a small rise, which can only stabilize the rate of economic decline. The complete end of the economic downturn requires at least one year after steady growth.
Therefore, steady growth will change investors’ pessimistic expectations and raise stock market valuations periodically, but the downward trend of overall earnings of A-Shares in 2022 will still have a negative impact on the stock market. It is suggested that after completing the cross-year market, investors should appropriately turn to defense. Sooner or later, the inflection point depends on the subsequent implementation of stock market liquidity and steady growth policies (pay attention to subsequent credit and Social Finance).
(4) short term strategy: the cross year market is getting better and better. there are three main driving forces supporting this cross-year Market: Valuation rebound + steady growth + seasonal recovery of residents’ funds. The first driving force is the “valuation rebound”. Since March, the adjustment time and amplitude of some sectors are large, so it is necessary to repair the valuation. The second driving force is the “optimistic policy before and after the new year”. With the implementation of the RRR reduction, the new year’s market will enter the second wave of rise dominated by stable growth expectations. Only the first two forces can support the market up to January, and then it is necessary to verify the activity of residents’ funds and the implementation of stable growth policies. If it can be continuously improved, the cross-year market can continue until March. Our current judgment is still optimistic, and we recommend investors to actively participate in the cross-year market.
industry configuration suggestions: in the last quarter, the stock market stock selection logic has changed greatly. Valuation repair has become the most important force driving the rise of individual stocks. After the rebound of food and beverage, public utilities, TMT and other sectors, the tourism and hotel sectors whose prosperity has been suppressed by the epidemic for the longest also began to repair. With the implementation of the RRR reduction and the positive setting of the central economic work conference, the valuation of sectors related to steady growth also began to be repaired. As it is now a performance vacuum period and the performance outlook for the whole year of 2022 is cautious, we believe that valuation repair will be the core stock selection logic before and after the new year. Configuration suggestions: (1) the supply and demand cycle of military industry, hotel, aviation and other industries is independent, which can be paid attention to all year in 2022. (2) Generally, financial real estate can advance, retreat and defend in the middle and later stages of economic downturn, and the strength of steady growth will be gradually strengthened in the next six months, which can exceed the allocation for six months; (3) Computers, media, food and beverage, home appliances and other sectors with poor performance this year are in the process of quarterly rebound.
(fan Jituo’s investment strategy)
