Core view
At present, the global economy is in contraction.
US stocks reflect not only the US economic cycle, but also the global economic cycle. The global economic expansion cycle ends in the fourth quarter of 2021. This has a clear mapping in many indicators such as output, PPI and American hourly salary;
At present, the United States is facing a serious inflation that has not been seen in 20 years, which has been transmitted to various fields, including travel, food, housing and so on. It has two driving forces: one is the rise of labor cost; The second is the high commodity prices. At present, there is no obvious sign of pressure slowdown in both.
Although the Fed raised interest rates for the first time in March, according to the market level reflected by the yield of 10-year US bonds, compared with history, it has raised interest rates about 8 times, and historical experience shows that the high point of the market often appears near the 6-7 interest rate increases of the Fed. In view of the above, we believe that US stocks are already falling.
At present, the time and space for the decline of US stocks are insufficient.
The average time for US stocks to fall is about 9-10 months, with a decline range of 16% - 25%. According to the current decline of more than two months, the range is 5.3%, which does not meet the historical sample center level in terms of time and space.
Since the 2008 financial crisis, the S & P 500 has stepped back on the 43 month line for four times and regained its upward trend, which can be regarded as the first important support for the market decline, but it is still far from here.
In addition, this US stock adjustment also contains the risk of intermediate cyclical level (analogous to the net bubble and financial crisis). We closely follow the 10 year -2 US bond yield differential as a standard.
Although the market will think that there is the care of the Federal Reserve in front of large risks, we also believe that the peak valley transition of the cycle is eternal. With vicious inflation and the attitude of the US government and NATO in the situation between Russia and Ukraine, the high commodity price will make this round of inflation more stressful in the United States and Europe, which makes the Federal Reserve in a dilemma.
Food, medical and operators are the excess return sectors in history.
In the decline cycle of US stocks, there are five sectors that surpass the market: essential consumption, real estate, medical treatment, communication equipment and public utilities; The industries that underperform the market are energy, industry, materials, finance, information technology and non essential consumption;
From the perspective of global industry performance, it is also similar. The sectors with significant excess returns are mainly household and personal products, food and beverage and tobacco, medical and health care equipment and services, retail of food and major products, biopharmaceutical and life technology, and telecommunications.
In short, food and beverage, medicine, telecommunications, utilities and other directions can be regarded as possible opportunities in the future. They may also reflect their excess returns in Hong Kong stocks through mutual mapping of global sectors.
Risk tips: the uncertainty of epidemic development, the risk of downward economic cycle, the uncertainty of the development of the situation in Russia and Ukraine, and the risk of the Federal Reserve raising interest rates.
