last week, US stocks weakened and commodities rose slower. These changes may indicate that the US economy is at the critical point from stagflation to recession. According to the experience of US stocks, if US stocks have not adjusted before the critical point, there may be a 20% retreat in the recession. If it is similar to May 1970 and June 1974, the stock market has been greatly adjusted before the critical point. Once the recession comes, it may be the last fall of the stock market. The recent depreciation of RMB exchange rate may also be related to this background. The initial impact of exchange rate depreciation on the stock market is negative, but in the middle and later stage, it has little impact on the stock market. The exchange rate and the US economic recession may suppress A-Shares in the near future, but the impact will not be long. Strategically, 2022 may be a V-shaped shock, with the first half similar to 2018 and the second half similar to 2019. Tactically, the rebound from mid March to early April has ended, and the time is exactly three weeks, which is in line with the normal time range of the rebound in the bear market. The next rebound of the index may need to wait, focusing on the changes of the meeting of the Central Political Bureau, the improvement of the epidemic situation and the interest rate meeting of the Federal Reserve in May
(1) the United States may be at the critical point from stagflation to recession in the past six months, the macroeconomic characteristics of most countries in the world were stagflation, and the final outcome of stagflation was mostly recession. Recently, US stocks began to weaken and the rise of commodity prices began to slow down. These changes may indicate that the US economy is at the critical point from stagflation to recession. Taking the US economy as an example, we focus on the performance of the stock market when the critical point comes.
The last three critical points from stagflation to recession in the United States are July 2008, may 2011 and October 2018. After these three critical points, U.S. stocks have made significant adjustments. After the critical point in 2008, the decline of the stock market began to accelerate, and soon exceeded the bull bear boundary of 20%, ushering in the worst decline in the subprime mortgage crisis. After the critical points of 2011 and 2018, the slow bull of US stocks was suspended, and then there was a 20% level adjustment.
Of course, the latest stagflation may be very different from the previous three times. Many signs suggest that it may be similar to the situation in 1970s. From 1970 to 1980, US inflation remained high for a long time. There were three critical points from stagflation to recession, namely, May 1970, June 1974 and November 1980. Before the first two critical points appeared, the stock market had undergone major adjustments. With the economy from stagflation to recession, the stock market ushered in the last decline. After the critical point in November 1980, there was a bear market in US stocks for nearly a year.
(2) the depreciation of RMB exchange rate is easy to occur in the period of global economic recession and the later stage of China's economic decline recently, the RMB exchange rate has depreciated rapidly. The last two sharp fluctuations of the exchange rate occurred in the second half of 2018 and the second half of 2015 respectively. Both occurred during the recession of the global economy and the late decline of China's economy.
The reason for the similar situation may be that the economic cycles of China and the United States are not synchronized. In all the economic downturns in history, China's economy is ahead of that of the United States. Therefore, in the early stage of the economic downturn, although the interest rate gap between China and the United States narrowed, the RMB exchange rate will continue to be strong due to strong exports to the United States, but in the later stage of the economic decline, the U.S. economy also began to decline, and the interest rate gap and import and export may form a negative repression.
From the impact of exchange rate depreciation on the stock market in the second half of 2015 and the second half of 2018, the stock market is mainly weak in the early stage of exchange rate depreciation. In the middle and late stage (2016q2-2017 and 20192020), the stock market has got rid of the impact of exchange rate depreciation.
(3) short term strategy: the next rebound, as early as early May 3 the rebound from mid March to early April has ended, and the time is exactly three weeks, which is in line with the normal time range of rebound in the bear market. The recent reduction of reserve requirements and interest rates is slightly lower than expected, the weak short-term economic data caused by the epidemic, the depreciation of RMB exchange rate and other factors continue to decline the market center, which makes the market in the first half of the year more and more like 2018. Given that the global economy may turn from stagflation to recession in the short term, the market will still be weak in the first half of the year. The next rebound of the index may have to wait as early as early May, focusing on the changes of the meeting of the Central Political Bureau, the improvement of the epidemic and the interest rate meeting of the Federal Reserve in May. Strategically, 2022 may be a V-shaped shock, with the first half similar to 2018 and the second half similar to 2019.
industry configuration suggestions: since the beginning of the year, the performance of sector is very similar to that during the bear market rebound in history. The anti inflation sector such as the initial cycle of the bear market is strong, the stable growth sector in the medium term of the bear market is strong, the oversold growth and non silver strength in the later stage of the bear market, and the sector with independent supply and demand pattern such as agriculture, forestry, animal husbandry and fishery are also strong in each round of bear market in history. What can be continuously allocated in the middle and later stage of the bear market will be the stable growth sector. Paying attention to finance, real estate and construction, we can appropriately increase the allocation proportion of non bank, because the higher the allocation value of non bank in the later stage of the bear market. With the increase of the range of market adjustment, the bear market may be entering the late stage. The performance of the sector in the next rebound may be different from that before. Some oversold growth or consumption may have performance. It is suggested to pay attention to Hong Kong stocks, Internet, media, etc.
