The conflict between Russia and Ukraine triggered an overall rise in commodity prices, and the expectation of overseas “stagflation” is heating up: since the outbreak of the conflict between Russia and Ukraine, the market’s tension over supply risks has led to a rapid rise in commodity prices and accelerated the accumulation of global inflation risks. After the epidemic, the situation of loose global liquidity and demand side stimulus policies led to the inflation of major countries in Europe and the United States at an all-time high, the CPI of the United States was close to 8%, and the peak of economic recovery from the epidemic had passed, the expectation of stagnant economic growth was rising, the market was worried that the rapid rise of commodity prices would reproduce the oil crisis of the 1970s, and the market panic was intensified, Concerns about the resurgence of global “stagflation” have risen sharply. Global risky assets fell sharply, safe haven funds flowed out of emerging markets, the VIX Index rose, and gold prices rose rapidly, breaking the $2000 mark.
Trade offs between Europe and the United States in response to the war: from the perspective of evolution and response, the European Central Bank began to ease the expression related to interest rate hike due to greater damage to its actual economic interests. In essence, Russia’s war exceeded global expectations. For the promotion and subsequent evolution of the Russian Ukrainian incident, Europe and the United States hope to further realize their political goals while minimizing collateral damage. In the early stage of energy transformation, the grasp of traditional resources and the efficiency requirements for new energy development force Europe to reconsider the issues of energy security and energy dependence. From the perspective of the United States, the economy is still resilient in the short term, and the Fed’s 25bp interest rate hike in March has become a high probability event. Since there is still the expectation of shrinking the table after the interest rate hike, it is necessary to continue to observe the Fed’s statement and process of shrinking the table and its impact on the global capital market.
Whether China will move towards “stagflation” driven by imported inflation: under the current policy framework, the steady growth policy of expanding domestic demand promotes the expansion of the middle and lower reaches of enterprise demand by stimulating infrastructure investment and manufacturing investment, and undertakes the downward transmission of the upstream price of PPI, which is likely to lead to the maintenance of high industrial inflation, but the overall upward probability of consumer inflation is small, In this case, there is structural “inflation” without “stagnation”. On the other hand, in the case of insufficient demand for end consumption, without considering the need to significantly increase the production expansion of middle and lower reaches enterprises, the policy of “ensuring supply and stabilizing price” can quickly curb the resurgence of industrial inflation, but the Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) of the independent system has a limited pull on the overall volume of economic growth. In this case, there is “stagnation” but no “inflation”. Therefore, under the combination of current difficulties and corresponding solutions, “stagnation” and “inflation” are unlikely to appear at the same time. We believe that at present, the first combination is more likely, and the structural “inflation” is still within the acceptable range for the time being.
The market sentiment is still pessimistic: the market has been running ahead based on the learning effect, which has been expected after a substantial trading one or two quarters in advance. When the actual situation indicates that there is a deviation from the expectation, the market will correct the deviation again, deviate from one dimension to the opposite direction again, and the market volatility will increase. At present, the market is trading imported inflation, which once again drives inflation upward. The strengthening of the expectation of overseas tightening will recover market liquidity. The driving force of economic growth is not enough to achieve the growth target. The market defines it as “stagflation”, but in fact, we explained the problems of “stagflation” and “inflation” we face in the previous part, Structurally, it is similar to the “inflation” combination in September last year, but the market sentiment is relatively low. In the current state, the bottom of sentiment is still not reached, and we still need to wait for the clearing of risk factors to calm the pessimism.
Future trend of A-share market: at present, China’s risk is that imported inflation rises again or continues to squeeze the profits of midstream industries, resulting in slower expansion and improvement of demand than expected. Overseas risk is that interest rate increase and table contraction will further shrink liquidity and possible adverse policies against China during the mid-term election. At present, the market lacks continuous profit-making effect, because after the influence of sentiment continues to be adjusted, the incremental funds are still on the scene, and the pattern of stock game is difficult to change. Under the background of pressure on China’s economy and corporate profits, the market only benefits from the downward trend of risk-free interest rate at the denominator, while the improvement expectation of profit at the numerator and the improvement expectation of risk premium at the denominator have not yet come, and the overall intrinsic value of the market under the pricing mechanism is low. In the first half of this year, we believe that there may be room for pessimism to continue to release, and the current market trading indicators do not show that the market has reached the bottom of sentiment. Therefore, at the current time point, we believe that we still suggest to stick to the direction of high winning rate without seeing obvious changes in the above factors, That is, the value sector driven by the triple logic of defensive trading under the catalysis of stable growth policy in the first half of the year, the rise of inflation risk driven by geopolitics and the expectation of weak recession. After the risk factors gradually subside, the adverse factors that suppress market sentiment gradually eliminate, the valuation of track / adult stocks is adjusted to a more reasonable range, and the style may switch again.
Risk tip: the expansion of the conflict between Russia and Ukraine affects the global economy, the Federal Reserve accelerates tightening, and the epidemic continues to deteriorate
