The performance of major categories of assets in China and the United States was consistent with Merrill Lynch's expectations
We built China's Merrill Lynch clock through China's CPI and industrial added value. According to Merrill Lynch clock, China has experienced six cycles since 2000. We constructed Merrill Lynch clock through the US CPI and output gap. According to Merrill Lynch clock, the United States has experienced four cycles since 2000. After the emergence of major world crises, the U.S. cycle has been significantly shortened. At present, the United States is in the stagflation stage of a new cycle. The historical returns of major categories of assets in China's and US financial markets are more consistent with the theoretical expectations of Merrill Lynch clock.
Performance of China's stock market under Merrill Lynch clock
During the recovery period, the growth index performed better than the value index. During the overheating period, the performance of the value index is better than that of the growth index. Similarly, from the perspective of different price to book index, the value stocks with low price to book ratio perform better during overheating.
The performance of industry indexes of A-Shares and Hong Kong shares is similar in different cycles. During the recovery period, the yield of most industries performed well. During the overheating period, all industries generally rose, during the stagflation period, the industry performance differentiated, and during the economic downturn, the industry generally fell. Growth consumer stocks such as consumption, medicine and science and technology performed best in the recovery period and overheating period, ranked bottom in the stagflation period (except science and Technology), and fell less in the economic downturn. The energy industry led the rise in the stagflation period and led the decline in the economic downturn period. The public utilities and telecommunications industry have a certain anti falling attribute in the stagflation and recession period, but they are at the bottom in the recovery period and overheating period. The performance of financial real estate industry is at the middle and lower reaches level in each cycle. Impact of Merrill Lynch clock on commodities
The prices of precious metals such as gold and silver are relatively independent and weakly affected by the Merrill Lynch cycle. Copper, aluminum, zinc, nickel, etc
Precious metals and crude oil prices are highly correlated with Merrill Lynch's clock. Consistent with Merrill Lynch's clock theory, when the US economy is overheated, the prices of metals such as copper, aluminum, zinc and nickel and crude oil rise rapidly, while when the US is in recession, the prices of metals such as copper, aluminum, zinc and nickel generally fall. Coke, coking coal and steel are highly correlated with China Merrill Lynch clock. When China's economy is overheated, coke, coking coal and steel will rise, while when China's economy is in a downward period, coke, coking coal and steel prices will continue to fall. This is because the main demand for steel and coal comes from China.
Future market outlook and configuration suggestions
The United States will enter the recession cycle from the stagflation cycle China Cifco Investment Co.Ltd(000996) it is expected to enter the recovery cycle. With the steady growth policy, China's economy is expected to enter the stage of recovery. From the perspective of Merrill Lynch clock, A-Shares and Hong Kong shares have ushered in a turnaround after the inflection point of China's economic prosperity, but will be negatively affected by the decline of the U.S. economic prosperity. In terms of style, after China enters the recovery period, we can pay attention to the growth style of the market and black commodities. Taking into account the decline of the U.S. economic boom, copper, aluminum and other non-ferrous metals and oil prices will be negatively affected in the future.
Risk tips: 1 US sanctions against Chinese enterprises have intensified; 2. The economy went down faster than expected; 3. The fluctuation of overseas market intensifies.
