On January 6, 2022, the Federal Reserve released the minutes of the interest rate meeting in December 2021. The minutes showed that most participants believed that the time for the Federal Reserve to raise interest rates might be earlier than expected, while some participants said that the scale reduction might also start quickly after the interest rate increase. Some participants believed that it might be necessary to adopt a less loose policy position in the future, which is more hawkish than the market expectation. In December 2021, the Federal Reserve’s interest rate meeting said that it would raise interest rates three times in 2022, and the interest rate would rise to the range of 0.75% to 1%. The market’s expectation of the Fed’s interest rate hike in March became 68%, and the expectation of interest rate hike in may became 80%. It is estimated that each interest rate increase will be 25bp In 2023, the interest rate will be increased three times, raising the benchmark interest rate to the range of 1.35% – 1.5%. The interest rate will be raised twice in 2024. The median forecast shows that the final long-term interest rate will return to 2.5%.
The minutes of the meeting pointed out that the faster completion of net asset purchase will enable the committee to better formulate policies to solve various reasonable economic results. Participants believed that the rate of continuous reduction in net asset purchases should be doubled. The December interest meeting of the Federal Open Market Committee (FOMC) said that it completed the increase of US Treasury bonds held by the system open market account (SOMA) of US $60 billion and institutional mortgage-backed securities (MBS) of US $30 billion, which is equivalent to the expansion rate of US $90 billion from US $120 billion per month before November.
From November to December 2021, the Fed tightened and the global risk-free rate of return fluctuated downward. Growth and small cap outperform blue chips. Since the end of December, the overseas rate of return has increased significantly, and China’s risk-free rate of return continues to be dominated by China. At the beginning of 2022, blue chip has again obtained the defensive allocation of market funds.
In the current period (January 5), the risk premium of A-Shares was 0.50%, 0.11% higher than that in the previous period. The overall profitability of A-Shares improved significantly, PE continued to revise downward, and the yield of 10-year Treasury bonds was 2.80% in the current period, which continued to maintain the investment value of A-share risk premium.
In the current period, semiconductor erp-1.09%, an increase of 0.06% over the previous period, in the allocation range with high risk premium; Pharmaceutical biology erp0 15%, 0.01% higher than that in the previous period, in the neutral and high allocation range of risk premium; National defense and military industry erp-1.34%, 0.02% higher than the previous period, in the neutral normal allocation range of risk premium.
In this period, the overall risk premium of the cycle sector still maintained a high allocation value: in this period, chemical ERP2 28%, a change of – 0.03% over the previous period, in the allocation range with high risk premium; Steel erp7 85%, a change of – 0.11% over the previous period, in the neutral and high allocation range of risk premium; Nonferrous Metals erp0 75%, a change of 0.05% over the previous period, which is in the highest allocation range of risk premium.
In terms of large and medium disk rotation, the price ratio of Shanghai Stock Exchange 50 to China Stock Exchange 500 generally showed a downward trend from 1.13 in mid February 2021 to the end of April. After a short recovery in May, it continued to show a downward trend, and the ratio in this period increased from 0.809 in the previous period to 0.816. The mid market continued to show strength over the market. In terms of large and small disk rotation, the price ratio between CSI 300 and Guozheng 2000 has generally shown a downward trend since mid February (the high point in 2021 is 0.85). After a short recovery in May, it has continued to show a downward trend, and the ratio in this period has decreased from 0.512 in the previous period to 0.509. Small cap continues to be stronger than the overall market trend.
In the current period, the dividend yield of Wande quana changed from 1.46% in the previous period to 1.46% in the current period. The ten-year Treasury bond yield Wande quana dividend yield was 1.343%, and the distance from the warning value of 2.5% (the highest point of the bull market in the past) changed from 117.42bp in the previous period to 115.70bp in the current period. The dividend yield of SSE 50 changed from 1.46% in the previous period to 1.46% in the current period. The yield of ten-year Treasury bonds – the dividend yield of SSE 50 was 0.2258%, and the distance from the warning value of 1.1% changed from 90.46bp in the previous period to 87.42bp in the current period. The dividend yield of Shanghai and Shenzhen 300 changed from 2.59% in the previous period to 2.58% in the current period. The yield of ten-year Treasury bonds – dividend yield of Shanghai and Shenzhen 300 was 0.855%, and the distance from the warning value of 1.8% changed from 96.13bp in the previous period to 94.50bp in the current period. The dividend yield of CSI 500 changed from 1.95% in the previous period to 1.95% in the current period. The yield of ten-year Treasury bond – dividend yield of CSI 500 was 1.3414%, and the distance from the warning value of 3% changed from 167.26bp in the previous period to 165.86bp in the current period.
(source: Shengang securities)
