Key investment points:
Fed interest rate hike landing, may start to shrink the table
1) the Fed raised interest rates in line with expectations. On March 17, the Federal Reserve held a FOMC meeting and announced that it would raise the federal funds target interest rate to 0.25% – 0.50%, in line with market expectations.
2) shrink the meter or open it in May. Powell said at a follow-up press conference that the reduction plan will be announced as soon as may. The framework of the reduction plan will be similar to the last time, but the reduction speed will be faster than the last time.
Taking history as a mirror: Six contractions in the history of the Federal Reserve
Since the scale and structure of the Fed’s balance sheet have undergone qualitative changes before and after the subprime mortgage crisis, and there are great differences in the scale and purpose of the reduction, we divide the six reduction into two categories: before the crisis and after the crisis.
1) five table contraction before the crisis: coping with inflation and passive table contraction are the main reasons. In 19201921, 19471951 and 19781979, the three downscales were to deal with the serious inflation caused by the “war economy” and the second oil crisis; The scale reduction from 1930 to 1931 was a passive scale reduction caused by the collapse of a large number of banks during the great depression; The contraction in 20 Zhejiang Nhu Company Ltd(002001) is the short-term withdrawal contraction after the temporary provision of liquidity.
2) a contraction after the crisis: monetary normalization after quantitative easing (QE). After three rounds of large-scale QE, the assets of the Federal Reserve soared to $4.5 trillion from $950 billion in August 2008. The scale reduction is passive (reducing the scale of maturing treasury bonds and MBS reinvestment) and gradually increasing the upper limit of scale reduction (the initial scale of scale reduction is US $10 billion / month and the upper limit is US $50 billion / month). The duration is about 2 years and the scale of scale reduction is about US $700 billion.
3) the pace and scale of this round of table shrinkage are faster and larger: referring to the initial scale of the previous round of table shrinkage and the proportion of the upper limit of table shrinkage in the total assets of the Federal Reserve, it is estimated that the initial scale of this round of table shrinkage is about us $20 billion per month and the upper limit of monthly table shrinkage is about US $100 billion.
What was the performance of major categories of assets during the contraction period?
1) bond market: in the stage of monetary tightening, the interest rate spread of 10y-2y US bonds continued to narrow. After the start of the table contraction, the long-term interest rate of US bonds increased significantly, and the interest rate spread between China and the United States continued to narrow during the table contraction.
2) stock market: during the implementation of interest rate increase and the period of interest rate increase + table contraction, the global stock market generally went down. In terms of market style, the growth of US stocks was dominant and the value of A-Shares was dominant.
3) bulk commodities: the US dollar index is strong as a whole, while the South China Commodity Index, Shenzhen Agricultural Products Group Co.Ltd(000061) index and crude oil price have all dropped, and gold is relatively strong in the stage of interest rate increase and continuous interest rate increase. China’s asset Outlook: the stock market should be alert to the possible capital outflow caused by the rise of us long-term interest rate and the suppression of risk appetite after the implementation of the table contraction in May. Value stocks may be relatively dominant. Bond market: at this stage, China’s economic fundamentals are still the main contradiction. Under the influence of the epidemic, the pressure of steady growth has increased, the credit expansion is weak, and the follow-up monetary policy is still possible to be further relaxed.
Risk tips
Macroeconomic and industrial policies have changed more than expected.
