In 2022, the Federal Reserve raised interest rates for the first time or from May to June. Before and after the Federal Reserve raised interest rates for the first time in the history of resumption of trading, combined with the increasingly close linkage between the Chinese and American stock markets, it is expected that A-Shares will follow the U.S. stock market fluctuations 3-4 months before the Federal Reserve raised interest rates for the first time, and there will be some adjustment pressure affected by U.S. stocks 1-2 months after the first interest rate increase.
1、 In 2022, A-Shares may show an “n” trend, with increased fluctuations in the middle section. Disturbed by the first interest rate increase by the Federal Reserve, the downward performance has become a consistent expectation. Under the background, the probability of A-share market in 2022 is a policy market, and the market fluctuates with the change of policy expectation. Among them, the beginning of the year is a relatively certain window for policy easing, superimposed on the performance of Listed Companies in a vacuum period, and early next year or a rare long stage in the A-share market. In the middle of 2022, the market may usher in a stage of increased volatility, and the Fed may raise interest rates for the first time or be a core disturbance. Finally, with the landing of uncertain factors such as the Fed’s interest rate hike and economic recovery, the market repriced on the new equilibrium.
In the middle of 2022, affected by the Fed’s first interest rate hike, the volatility of A-Shares may increase, driving the mid-range fluctuation of the “n” trend throughout the year. The performance of the stock market before and after the Fed’s first interest rate hike for the last three times was resumed. The volatility of the S & P 500 index increased significantly 3-4 months before the first interest rate hike, and the market was obviously under pressure 1-2 months after the interest rate hike.
Combined with the performance of U.S. stocks before and after the Fed’s first interest rate hike, the interaction between China and the U.S. stock market is more close. It is expected that the volatility of A-Shares will increase 3-4 months before the Fed’s first interest rate hike or follow the U.S. stocks next year, and there may be some adjustment pressure as the U.S. stocks 1-2 months after the interest rate hike.
2、 The impact of this round of fed interest rate hike on A-Shares mainly comes from the linkage between A-Shares and US shares under the resonance of risk appetite. First, this round of fed interest rate hike may have little impact on the fundamentals of a shares. On the one hand, historically, the Fed’s interest rate increase did not necessarily accompany the U.S. economic downturn. This round of interest rate increase has limited impact on the global economy. On the other hand, the current market has basically formed consistent expectations for the downward trend of A-share fundamentals next year, and profitability is not the core contradiction of the market.
Secondly, the RMB may continue to remain relatively strong. Even if the Federal Reserve raises interest rates later, the risk of capital outflow is relatively controllable. On the one hand, China will continue to maintain a trade surplus and strong demand for RMB and foreign exchange; On the other hand, it is difficult to further widen the differences between European and American economies and monetary policies, and there is limited room for further upward movement of the US dollar index.
Finally, with the closer linkage between China and the US stock markets, A-Shares are facing the spillover impact of US stock fluctuations. The Fed raised interest rates for the first time in the past three times. Before and after the latest interest rate increase (December 2015), the correlation between China and the US stock market has significantly improved.
With the more convenient access of foreign capital to and from the A-share market, the global risk appetite has a more direct impact on the A-share market.
3、 Next year, the Fed may raise interest rates for the first time from May to June. With the U.S. economy peaking, the pace of subsequent interest rate increases may slow down. At present, the market expects the fed to raise interest rates for the first time from May to June next year. However, as the U.S. economy peaked and fell, the pace of subsequent interest rate increases may slow down. The implied interest rate increase probability in the current market is 70% on May 4 next year and 89% on June 15 next year. The reason for this round of fed interest rate hike comes from the continuous pressure of inflation on the one hand and the steady improvement of US employment on the other. However, from the perspective of China’s capital expenditure growth leading the United States in the third to fourth quarters, the current growth rate of China’s capital expenditure is in the peak stage, and the growth rate of U.S. capital expenditure may peak and fall in the third quarter of next year. At that time, the U.S. economy may also be in the decline stage, and the pace of interest rate increase by the Federal Reserve may slow down.
Under the disturbance of the Federal Reserve’s first interest rate increase, the rhythm of fluctuations in the middle stage of the “n” trend of A-Shares next year is prospected: combined with the performance of U.S. stocks before and after the Federal Reserve’s first interest rate increase, the linkage between China and the U.S. stock market is more close. It is expected that A-Shares will increase with the increase of U.S. stock fluctuations in the middle and later stages of the first quarter of next year, and A-Shares may also face downward pressure similar to u. As the pace of the Fed’s interest rate hike slows down, the global market may reprice in the new equilibrium, and the effect of the first interest rate hike may gradually weaken.
Risk tips: the Fed’s policy exceeded expectations, the risk of macro liquidity contraction, and the development of the global epidemic exceeded expectations
（ Sinolink Securities Co.Ltd(600109) ）
