US bond interest rate is still the anchor of asset allocation in 2022. Although the recent performance of the market, including commodities, US bond interest rates and US stocks, has been affected by the Russian Ukrainian war, we believe that the impact of the Federal Reserve's monetary policy on the expectation of interest rate increase and table contraction will be a continuous leading factor. Under the influence of the Federal Reserve's "rapid interest rate increase + table contraction", US bonds are still the anchor of the pricing of major assets, Judging the adjustment range of US stock valuation according to US debt is still the focus of our attention.
Referring to the impact of the change of US bond interest rate on the stock market, especially the valuation, in the historical interest rate increase cycle, we calculate the valuation adjustment range caused by the Fed's interest rate increase, and give the approximate performance range of US stock index according to the performance forecast.
In the historical interest rate hike cycle, the upward interest rate of 2Y and 10Y US bonds has a certain rule on the valuation of US stocks. In 2022, the Federal Reserve continuously increased interest rates + reduced the table, and the 2Y and 10Y interest rates increased at the same time, which is more similar to the period from October 2017 to December 2018. With reference to the US bond interest rate and valuation variation coefficient at that time, under the three assumptions of optimism, neutrality and pessimism on the annual peak of 2Y and 10Y US bond interest rates, the reasonable PE level of S & P 500 is about 21 times, 20 times and 18 times. Since the beginning of 2022, the high interest rates of 2Y and 10Y US bonds have been 1.75% and 2.1% respectively. Under this interest rate level, the reasonable position of S & P 500 valuation is near 21. At present, the valuation still has 5% room for adjustment. However, according to the most pessimistic assumption of interest rate increase, if the table is shrunk more than expected, the long-term bond interest rate will continue to rise to 2.3%, and the S & P 500 valuation will still have a downward pressure of 15% - 20%.
The valuation of S & P 500 shows the characteristics of obvious trend rise and nonlinear regression. Referring to the two liquidity tightening environments in 2011 and 2018, the valuation of S & P 500 is about 30% higher than the trend value. Based on this, we estimate that the reasonable PE level of S & P 500 in 2022 is about 18.95 Under this assumption, there is still 17% callback space for the current valuation level of S & P 500.
The stage with the greatest pressure on the S & P 500 valuation correction ended in the first half of 2022, mainly for the following two reasons: 1) the market's impact on the market caused by the poor expectation of the Fed's tightening will be alleviated after the gradual implementation of the policies on interest rate increase and table contraction in March and June, and it is difficult for the US bond interest rate to rise in a pulse; 2) Under the base effect, it is relatively certain that the year-on-year growth rate of US inflation in Q2 will decline in 2022. The decline of inflation will ease the pressure of monetary tightening than expected.
The slowdown in performance will drag down the performance of the stock index. According to Bloomberg's unanimous expectation, the performance growth rate of S & P 500 in 2022 will be 11.37%. The point of S & P 500 is calculated by P = PE EPS. Under the level of 2 y and 10Y U.S. bond interest rates of 1.75% and 2.1% respectively, the probability of S & P 500 will close down by 5% - 10% in 2022. On the one hand, the liquidity contraction and the upward rise of U.S. bond interest rate will suppress the valuation, On the other hand, the slowdown of performance growth makes the index lack of driving force., In 2022, it may rebound by 1% - 4% compared with the current point.
Be cautious about the rebound of US stocks. With the gradual reduction of market uncertainty, the S & P 500 index will rebound after the sharp decline in valuation, but we recommend caution. First of all, although the performance of Q1 US stocks is OK, the expected difference of the Fed's monetary policy is still disturbed, and the high volatility of the market will increase the difficulty of participating in the rebound. Secondly, there is great pressure on the performance decline of Q2 and Q3 US stocks, which will restrict the rebound momentum of the index. We believe that the real reversal needs to wait for Q4 in 2022. Driven by the release of valuation pressure and the upward growth of performance, the S & P 500 is likely to have a positive return. It is suggested to bargain hunting in Q3 in 2022. At the same time, other indexes of US stocks can also refer to the same fluctuation direction, but the range will be different.
Maintain the view of risk control in the first half of the year and Bo income in the second half of the year.
