Core view
The recent important factors affecting the market are still the epidemic situation and steady growth in China, foreign geopolitics and the rise of US debt. However, there have been some changes in the marginal importance of the four factors. Specifically, the epidemic situation is high and difficult to fall, the sealing and control management is strengthened, and the potential impact on the economy is greater than previously expected; Steady growth formed an important support for the smooth operation of the economy in the first quarter, but the strength of policies has slowed down recently; The rise of US debt continues to exert influence on the market to reach a new equilibrium; Geopolitical risks have not been significantly mitigated, but the marginal impact on the market has changed little.
The epidemic is still severe and the economy has not improved. The epidemic situation in China is still severe. The number of newly confirmed cases and the number of provinces involved are running at a high level. The dynamic zeroing strategy is superimposed on the continuous spread of the epidemic. The potential impact of this round of epidemic on the economy may have exceeded the impact of previous epidemics. The vehicle freight flow index continues to be low, reflecting that the sealing management has not been relaxed, and the recovery of supply chain and tertiary industry will take time.
There are constraints in monetary policy and hidden worries in fiscal policy. The orientation of monetary policy has changed from "focusing on me" to "giving consideration to both inside and outside", and from stable growth to paying attention to the price level. Recently, the sharp rise in the yield of US bonds and the rapid depreciation of the RMB exchange rate have suppressed the central bank's interest rate cut. The "semi RRR cut" on April 15 is an obvious signal of the recent adjustment of the direction of monetary policy. There are hidden worries about the sustainability of fiscal policy. On the one hand, the issuance pace of new special bonds of local governments slowed down. After entering April (as of April 24), the issuance of new special bonds of local governments began to slow down. On the other hand, the economic downturn has led to a decline in fiscal revenue, especially the continued depression of the real estate industry, which has a great drag on the income of local government funds.
The influence of peripheral factors increases. With high inflation in the United States, accelerated interest rate hikes may be inevitable. Inflation in the United States has risen rapidly, faster than in the more comparable 1960s and 1970s in history, but the current policy interest rate obviously lags behind the inflation level. Therefore, the Federal Reserve may speed up the pace of interest rate hike in the future. In addition, in the early stage of the substantial interest rate hike in the United States, the economy was in an upward cycle, and this interest rate hike began with the weakening of the U.S. economy, which deepened the market's concern about the U.S. economic recession. In addition to the sharp rise in US debt, the situation in Russia and Ukraine also has great uncertainty.
Outlook. Recently, the economic expectation has weakened, the policy of stabilizing growth is insufficient, the external uncertainty has increased, the market confidence has been significantly hit, the stock, bond and foreign exchange have been killed three times, and all the style indexes of the stock market continue to weaken significantly. In the short term, there are certain variables in geopolitics, the trend of China's epidemic, the implementation of stable growth policy and the upward range of US debt. It is suggested to follow up and wait-and-see and respond flexibly. The undervalued value is still relatively dominant, but the structural differentiation may enter the middle and late stage. Treasury bond yields may remain low and volatile in the current range as a whole. It may take some time for the market to repair economic expectations. The next Politburo meeting is the key.
Risk tips: the change of the epidemic situation exceeded expectations, and the development of the situation in Russia and Ukraine exceeded expectations
