Key investment points
Review of the US economy in 2021: the fiscal and monetary forces continued to develop, the epidemic disturbed the economic rhythm but did not change its recovery trend, and prices continued to rise. With the increase of vaccination rate and the fiscal stimulus of US $1.9 trillion, the US economy recovered rapidly. The GDP in the second quarter was 6.7% yoy. The economy was impacted by the “delta” virus in the third quarter. However, the US epidemic prevention implemented the “lying flat” measures and opened the border in November. The recovery continued in the fourth quarter. However, policy stimulus led to soaring prices, energy, second-hand car prices and supply chain problems continued to push up, US inflation exceeded expectations, prices reached a new high in nearly 30 years, and the unemployment rate continued to improve. The Fed turned its monetary policy and began to implement taper. Subsequently, inflation is still the key variable in 2022.
Review of China’s economy in 2021: the economy slowed down quarter by quarter, with strong external demand and weak domestic demand. The rise of PPI continued to exceed expectations, financial postposition and monetary structure. Specifically, the production was strong, and the energy consumption slowed down until August; Exports remained high throughout the year; Consumption is generally weak affected by the epidemic; Manufacturing investment continued to recover, infrastructure continued to fall short of expectations, the prosperity of real estate continued to decline under the tone of “no speculation in real estate”, individual real estate enterprises had a liquidity crisis, the margin of real estate policy was relaxed in October, and the downward trend began to ease. In 2021, with the exception of booming exports, domestic demand was generally passively affected and actively suppressed, and economic growth was under pressure in the second half of the year. The scissors gap between PPI and CPI continued to expand, and the profits of midstream and downstream enterprises were squeezed. The currency was stable and loose throughout the year, the reserve requirement was lowered twice, and structural tools continued to work; The growth rate of social finance continued to decline, and the credit structure deteriorated until the fourth quarter. The government has made efforts to reduce taxes and fees for small, medium-sized and micro enterprises, and the expansion of real estate tax has been put on the agenda. In the first three quarters, the policy still focused on risk prevention and structural adjustment. In the second half of the year, the economic pressure increased and the steady growth policy was introduced.
US economic outlook for 2022: the US is expected to continue its recovery, but the high point of economic growth may have passed.
In the short term, the intensity of fiscal and monetary easing has gradually decreased, and the high point of the U.S. economy may have passed. However, in the long term, the U.S. epidemic prevention measures “lie flat”, the vaccination rate continues to rise, and the economic probability is still on the road of recovery. At the same time, high inflation remains the main risk focus, and the Federal Reserve is forced to raise interest rates sharply in advance or accelerate the U.S. economy into recession. Mainstream institutions in the world have lowered the U.S. economic growth in 2022. The world bank, IMF and Goldman Sachs predict that the U.S. economic growth in 2022 will be 4.0%, 5.2% and 3.8% respectively.
(1) The strength of US fiscal and monetary policy has declined. Financial subsidies were reduced, and residents’ savings fell from a high of $5.8 trillion to the current $1.2 trillion. Biden’s “reconstruction bill” was stranded due to opposition from Party members recently, and the amount was also reduced to $1.75 trillion. At the same time, the Federal Reserve taper accelerated, and the interest rate meeting showed that interest rates would be increased three times in 2022. Compared with 2021, fiscal and monetary support in 2022 decreased significantly, and the high point of the U.S. economy may have passed.
(2) The impact of the epidemic has weakened. The epidemic happened occasionally, but the “lying flat” epidemic prevention measures were not changed. The United States opened the border in November. Biden said that he would not further restrict travel or close the economy due to “Omicron”. At the same time, the vaccination rate continued to increase, and it is expected to continue to rise in the future. The production of specific drugs is also expected to expand, and the impact of the epidemic will gradually weaken. In the long run, the US economy is still on the road to recovery.
(3) Inflation is expected to fall from a high level, but there is still a small risk of losing control. The gap between supply and demand of crude oil is expected to be reduced, and the supply bottleneck will be alleviated. However, with rising wages, rising house prices and rents, what is more terrible is the rising inflation expectations of the whole society. There is a small risk of runaway inflation in the United States. If high inflation continues, the Fed will be forced to raise interest rates sharply in advance, or accelerate the US economy into recession.
China’s economic outlook for 2022: policy first, economy first low and then stable, focusing on when the real estate will stabilize and the development of new energy.
China’s economic growth is expected to be about 5.3% in 2022, with a rhythm from top to bottom and from bottom to top. Exports will fall steadily, but the outlook may still exceed expectations, and the annual growth rate is expected to be about 8.5%; Consumption is expected to recover weakly, greatly affected by the epidemic in the short term, and the social zero growth rate is expected to be about 7.0%; Manufacturing investment is expected to maintain a high momentum driven by high-tech manufacturing, with a growth rate of 5.5%; Real estate is expected to maintain a small positive growth of about 2% throughout the year; Infrastructure has made some efforts, and the broad growth rate of infrastructure may reach about 7.5%. At the same time, cross cyclical and counter cyclical adjustment policies are the main support. The total fiscal volume has not changed much, and the rhythm is obvious, which depends more on central investment. In terms of currency, the total amount remains stable and loose. It is expected to reduce the reserve requirement, interest rate and LPR. Structurally, it will still be the main force point.
(1) Focus on when the real estate will stabilize. We expect the decline in real estate investment in the second quarter to be contained. Real estate is the focus of the economy in 2022. It is expected that new construction will continue to decline, dragging down construction and superimposing the downturn in land transactions, resulting in the decline of both construction and installation investment and land investment. However, the “policy bottom” has been realized, and sales are expected to stabilize first. Subsequent completion, new construction and construction will be supported. It is expected that real estate investment will continue to decline in the first quarter of 2022, but the slope will continue to slow down, From the second quarter, the decline in the growth rate of real estate investment is expected to be curbed and usher in the end of the market.
(2) New infrastructure and new energy are the main development direction. The Ministry of finance basically completed the issuance of special bonds at the end of November. It is required to realize the physical workload at the beginning of the year. At the same time, it has issued the amount of special bonds of 1.46 trillion in 2022 in advance. Superimposed on the optimization of government project approval, the PPI has peaked. Infrastructure investment is expected to become the main focus of cross cycle regulation and the pace of force is ahead. In terms of direction, new infrastructure and new energy (power generation, transmission and energy storage) are the key support directions of the policy in 2022.
(3) The scissors difference between PPI and CPI will continue to decrease. Pork prices will hit the bottom and rise, driving the CPI center to rise, with an annual average of about 2%. Commodity prices may change from high shock to shock decline. At the same time, the energy consumption dual control policy will gradually correct the deviation and superimpose the high base effect. PPI will gradually decline throughout the year. It is expected to remain high in the first quarter and accelerate the decline in the follow-up. PPI is expected to turn negative year-on-year in the fourth quarter. The ppi-cpi scissors gap will narrow, the profits will be redistributed, and the middle and downstream manufacturing industry will benefit relatively.
(4) The monetary policies of China and the United States are misplaced, and the United States is tight + China is wide. China’s economy is under great downward pressure. The central economic work conference has set the tone that next year’s economy will be dominated by stability and finance will take the lead. At the same time, the monetary policy will continue to reduce reserve requirements and interest rates. At the same time, the monetary and fiscal policy of the United States will be tightened. The United States will end taper in March 2022 and raise interest rates for the first time in June. Under the dislocation of China US policy, there is still a certain window period for China’s easing, and there is a high probability of “focusing on me”.
(5) Sino US relations may be tightening. The Biden government’s poll support rate is low. In 2022, the focus of Biden government’s work will shift to the mid-term election in November, which is bound to play the “diplomatic card to China” to attract votes. We believe that Biden may be relaxed at the tariff level in 2022, but he will be tougher with China on issues such as ideology, geopolitics, science and technology, finance and so on. China US relations as a whole will be tighter than in 2021. It is expected to support China’s export surplus, but the fluctuation of RMB exchange rate will increase.
Major asset allocation in the first quarter of 2022:
(1) Equity allocation. The allocation guidelines of US stocks in the first quarter were “standard allocation”. The allocation guidelines for A-Shares in the first quarter were “recommended”. The allocation guidelines for Hong Kong stocks in the first quarter were “standard allocation”.
(2) Bond allocation. The allocation guidelines for interest rate bonds in the first quarter are “recommended”. The allocation guidelines of credit bonds in the first quarter are “standard allocation”. The allocation guidance of convertible bonds in the first quarter is “standard allocation”.
(3) Commodity foreign exchange allocation. The configuration guide of gold in the first quarter is “standard configuration”. The configuration guideline of USD in the first quarter is “standard configuration”.
Risk tips: 1 The decline of real estate exceeded expectations; 2. China’s policy is less relaxed than expected; 3. China’s epidemic impact and prevention and control measures exceeded expectations; 4. The impact of Fed tightening on China exceeded expectations; 5. The impact of China US relations exceeded expectations.
