Introduction: the recent conflict between Russia and Ukraine has continued to ferment, the global risk appetite has been impacted, and the fluctuation of global assets has intensified. Market investors are generally concerned about the impact of the conflict between Russia and Ukraine on the trend of major assets and a shares. Therefore, we reviewed six rounds of wars with great impact in recent 30 years and resumed the trend of major assets and A-Shares during the war for investors' reference.
1. Crude oil: War is a short-term variable of crude oil price fluctuation
-- in the short term, crude oil rose significantly 30 days before the war and 5 days after the war. The higher rise in crude oil prices before the outbreak of the war may be due to some funds hyping crude oil prices in advance by relying on the war expectations. However, as the time point of the war approaches, the expected realization makes some funds hyping crude oil in advance begin to realize floating profits. The short-term rise of crude oil after the outbreak of the war or because the market is worried about the reduction of crude oil supply due to the outbreak of the war. Therefore, after the outbreak of the war that does not produce crude oil on the main battlefield (Afghanistan war and Russia Georgia War), the crude oil price did not rise significantly. From the long-term perspective, war is only a short-term variable affecting crude oil prices, which is difficult to change the previous trend of crude oil prices.
Different from the oil crisis in the 1970s, the outbreak of war in recent 30 years has a relatively small impact on oil production.
-- Europe and the United States will try their best to limit the impact of energy supply caused by sanctions against Russia. Although the sanctions imposed by Europe and the United States on Russia's energy have been on the agenda, it is less likely to impose excessive sanctions on Russia's crude oil exports from the perspective of Europe and the United States' own interests. Referring to the US sanctions against Iran in 2018, Iran was excluded from the SWITF system, but 8 countries and regions such as Chinese mainland, India and Japan were granted temporary immunity from the import of crude oil in Iran. Therefore, we believe that in this round of sanctions, European countries such as China, the Netherlands and Germany, which are highly dependent on Russian crude oil, may also be exempted from import, so as to avoid supply shortage.
2. Gold: before and after the outbreak of the war, gold performed well
-- in the short term, gold performed better on the eve of the war and 30 days after the war. Within 1-10 days before the outbreak of the past seven wars, the VIX Index has a high probability of rising, and the risk aversion in the market on the eve of the war is often the highest. Therefore, funds prefer gold assets and catalyze the rise of gold price before the outbreak of the war (brewing stage). In the long-term dimension, war is only a short-term variable affecting the gold price, which is difficult to change the long-term trend of the gold price. After a simple regression of gold price and inflation expectation, risk aversion attribute and exchange rate since 2003, we find that inflation expectation has the strongest explanation for gold price.
-- in the medium and long term, inflation expectations will become the main driver of the rise in gold prices. First of all, the stage with the greatest impact of the war is passing. Referring to history, as the market returns to rationality, the contribution of risk aversion to the rise of gold price will probably decline.
Secondly, considering that Russia and Ukraine are large resource countries (the output of resources such as food, energy and metals accounts for a relatively high proportion in the world), the uncertainty of European and American sanctions against Russian exports will exacerbate inflation expectations and push up the price of gold.
Finally, the stronger fundamentals of the United States relative to Europe, combined with the fact that the tightening pace of the Federal Reserve is faster than that of the European Central Bank, the US dollar index will have strong action force in the future, which may slow down the upward slope of gold prices.
3. Global stock market: after the war broke out, the stock market showed a "V" trend - in the short term, the war disturbed the stock market to some extent, but within 30 days after the war broke out, the probability of V-shaped rebound of equity assets was high. Among them, as far as US stocks are concerned, we believe that wars in which the United States is directly involved often involve the core interests and major strategies of the country. Therefore, after the victory of the war in which the United States is directly involved, the boosting effect on sentiment is more obvious, which is reflected in the significant rise of US stocks 30 days after the outbreak of the war in which the United States is directly involved. However, in the long run, the pricing power of US stocks lies in the numerator rather than the denominator, which does not affect the fundamentals of US stocks. The war is difficult to change the trend of US stocks. During the resumption of several rounds of wars, the outbreak of the war did not reverse the growth trend of the net profit of the S & P 500. However, the long-term impact of the war on US stocks in recent 30 years was limited because the contribution of profits to the rise and fall of US stocks was greater than the valuation.
-- on the premise that both Europe and the United States said they would not directly send troops to Ukraine and that Russia and Ukraine began negotiations, the stage with the greatest emotional impact of the war is passing, so the impact on the stock market is weakened. Looking back, the tightening pace of the Federal Reserve and whether the Biden government raises taxes or not are the key to determining the trend of US stocks this year.
4. A-share market: focus on the three chains of agriculture, metals and energy - on the whole, the impact of the outbreak of war on A-share is mainly reflected in the short-term emotional impact. After the resumption of several rounds of wars in recent 30 years, the data show that the victory and odds of A-Shares are lower than those of the global stock market from one day before the outbreak of the war to five days after the outbreak of the war.
In the medium and long term, the war will not change the trend of China's stock market, and A-Shares are dominated by endogenous factors. The outbreak of the war did not change the valuation or profit trend of a shares, which means that its medium and long-term impact on A-Shares is relatively limited.
-- on the whole, the risk aversion caused by the war is gradually being digested, and the follow-up A shares will still "focus on me", and March is an important observation window.
-- in terms of industry allocation, under the background of the conflict between Russia and Ukraine, taking the limited supply of Russia as the anchor, we believe that the agricultural chain, metal chain and energy chain will become the three main beneficiary directions, including agricultural chain (planting industry, potash fertilizer, etc.), metal (aluminum, steel, nickel, etc.), energy chain energy (coal, natural gas, crude oil), etc.
Risk tip: the conflict between Russia and Ukraine is more than expected; Crude oil prices rose higher than expected; The Fed tightened more than expected.
