Tianfeng Securities interpretation of a trade war impact on stocks: is not conducive to cyclical stocks

  This switched-day wind wind research study [days] Institute of wind day macro strategist solid income team Abstract: After the Fed to raise interest rates in anticipation of landing, but also what needs attention?The similarities and differences between China deal?How to determine the follow-up stocks, bonds, exchange movements and other categories of assets?In response to these problems, Tianfeng Securities Research Institute, macro, strategy, fixed income team conducted a joint interpretation。   Beijing on March 22, March meeting on interest rates announced the resolution, hike 25BP, China's central bank will soon follow, OMO interest rate increase。   After the Federal Reserve to raise interest rates in anticipation of landing, but also what needs attention?The Chinese central bank's response to the similarities and differences?How to determine the follow-up stocks, bonds, exchange movements and other categories of assets?In response to these problems, the Securities Institute of days the wind macro, strategy, fixed income team carried out a joint review。
  After the hike: the US economy and see how?  Tianfeng macro team: Fed rate hike in March meeting, in line with market expectations。
Concerns investors more focused on Powell's appearance at the meeting, as well as for future economic data, as well as the first to predict the future path of interest rates and rhythms。
  Information meeting revealed that include: 1) the number of times this year to raise interest rates expected to remain raised four times instead of three times on, but raised its interest rate expectations in 2019 (2 raised to 3 times)。   2) Powell more optimistic expectations for the economy, 2018% to% in December), and cut its forecast unemployment rate (% 2018% in December), but the forecast for PCE inflation and core PCE inflation remains unchanged at% overall, although we believe that this meeting is the result of a dove, but reveal the flavor of hawks。
First, the number of members forecast three times and four times the rate hike are six and four members predict interest rate increase from the last three to six people, so do not rule as economic data continued to turn for the better plus 4 times。 Second, Powell stressed that although the risk of a trade war, but on the economic and inflation outlook, and that fiscal stimulus has improved the economic outlook。   US economic cycle we are at the top judge short period, extending the tax reform at the top of its time, this year should be entering the superheater stage。 Inflation should continue to focus on wage growth, the core PCE basically does not consider the weight of energy。 Also believes that US stocks will not have the opportunity to beta this year, more shocks may be biased。 US economic data continued upward push up the United States, which will limit the upside in US stocks。 US economic data downlink performance of US stocks naturally not good。   After the hike: how to pressure from abroad to see?  Tianfeng solid income team: The Federal Reserve meeting on interest rates, the market focus is not whether to raise interest rates, but to focus on: the final annual raise interest rates three times or four times。 According to the current content of the resolution and Powell press conference point of view, the Fed's position is 3 times。   This is Powell's February statement in Congress have a more significant difference: Powell's presentation was widely interpreted by the market as interest rates four times to open the door。
  The reasons for this difference mainly comes from the difference in the decision-making basis for judgment, Powell did in February monetary policy report before Congress, expressed in the decision-making is based on: inflation: "In this environment, we expect the inflation rate for 12 months It will rise this year, and around 2% of the Federal open market Committee's target in the medium term to stabilize。
Wages may grow at a faster rate。
"In this resolution meeting on interest rates, the Fed further lowered the unemployment rate expected in 2018 is expected to% (in December 2017 is expected to be%), but still maintain core% of the expected 2018 level unchanged; in a subsequent news release Powell congregation expressed surprise at the lower than expected payroll growth, although still expect inflation to continue upward, but is not considered signs of inflation will rise rapidly existence。   Thus, summary, payroll strong performance is not as expected, then bring inflation picked up speed is relatively slow, is meeting on interest rates in March and February, Powell congressional report was the core difference lies, due to the subtle changes in the decision-making basis for judgment, with to the position of the interest rate path changes, and thus for the market, the future of the game is still the inflation trend。   It should be noted that, although public statement the Fed is raising interest rates three times, but the interest rates bitmap, more and more members of the Fed tends to raise interest rates four times, in fact, the possibility of additional rate hike is not completely loss of concrete progress still based on the evolution of inflation。
  Game inflation trend, not only in the future evolution of monetary policy, but also in asset pricing for US debt: Long-term US bond yields pricing has three parts: the expected policy rate, and duration of the expected level of inflation premium preferences (termpremium), which expected the policy rate depends on future Fed rate hike expectations (but overall space is not too much), but the period depends on the preferences of premium European and Japanese central bank's asset purchase, it can be said to represent almost two parts the direct impact of monetary policy changes, but not much space in the short term。   Core inflation is still expected that the premium part, because he is the basis for monetary policy decisions, so he not only has to bring up the expected premium itself, but also bring changes in the US and Europe at the pace of monetary policy contraction, thereby affecting the other two portions premium。   The US labor market is tight edge of proportion "to find part-time work but can not find full-time work," the workers point of view, the current labor market, this demand will drive up future salary, the US debt will be with high probability the pay – confirmation of inflation, continue upward。
  Dollar parity as a probability, which is mainly composed mainly (accounting for nearly 60%), thus making the major comparison between the United States and Europe had begun around, including the United States, Europe and the real yield on long-term debt is a very good indication index but this indicator obviously undergone recent trend deviation。
  The main reason is that this indicator does not cover the inflation premium part, but it is still the major expression of differences in US and European monetary policy, if we add the difference between US and European inflation is quite clear: but although affected by the US and European monetary policy differences fluctuation followed by the inflation, and there is a significant time lag for the reaction of inflation, pre-digestion is 17-year recovery in Europe is stronger than the US inflation performance, but since the end of last year, the US inflation rate of recovery was stronger than the euro area, pursuant to we judge, in appreciation pressures in uS dollar。   Return to the country, there are two major channels of influence: First, follow the policy rate increase。
From an interview with reporters twice the central bank's statements can be seen to follow the policy interest rate increase is mainly based on three points: to deal with the Fed to raise interest rates, narrowing the interest rates and money market interest rate spreads, it is expected to guide the control lever and generalized credit expansion, and December basically the same, further illustrates the direction of the current focus of attention three central banks – peripheral pressure, financial and monetary policy transmission cycle, which is equivalent to the whole market a clear framework of judgment to determine whether the future will follow。   Through this framework, the policy rate will be raised gradually be expected to digest, as the central bank's statement – "The open market operations, interest rates edged up in line with market expectations, the market is a normal reaction to the Federal Reserve to raise interest rates just" and thus the future follow-up of ultra the expected impact also controllable。
  Another channel is / US interest rate and capital flows: For now, the loss of pressure indicators of capital is not large, but also in the trade surplus stage, there are hedge exchange rate channel space; and US interest section, along with the United States uplink yields, the yields in the downlink, the two ends of the length of the spreads are at a relatively low level。 However, the main expression of US interest rate debt or in debt to the United States to follow, but the past year, both out of relevance。   If we deconstruct further US interest rate relationship can be found in: US interest rate = 10Y US Treasuries = -10Y in debt in debt (expected policy rate + expected inflation rate + Term preference) – US debt (expected policy rate + expected inflation rate + term preference) = poor Sino-US policy interest rate + inflation premium difference between China and the US + China and the US deadline preferences premium difference。
  Wherein the difference and guiding effect of the difference between the policy rate of inflation in。   The difference is that with regulatory and liquidity as the representative of China and the US preference for premium period forms a distinct difference, and the current debt in the principal contradiction is that "regulation" and "mobility" and therefore we judge, completely smooth regulatory and liquidity is expected to previously, because of their age preferences account for the trend deviation will still exist (up US bond yields and will not significantly drive up in bond yields), but is expected to stabilize once the current intensified pressure from abroad will once again push the debt Evolution, after all, "it" never far away。   And that this round of financial risk prevention, strong regulation in accordance with the learning contents of the Politburo in April, is that in order to cope with external shocks overseas policy changes form (this also depends on overseas fundamentals, especially the inflation performance), thus whether it is domestic regulation itself but also the duration and intensity of the pressure conduction or overseas, the core inflation trend is global, it is to contact all the key。
  In the face of uncertainty overseas, the direction of least resistance Tianfeng strategy Liu Chenming / Xu Biao 1, depending on what the medium-term US bond yields?  Why since the second quarter of 2017 for US debt is expected to raise interest rates and shrink the table seemed indifferent?In the near future, but continuous break the psychological barrier?Root of the problem is that the direction of change depends on US bond yields, that is, changes in expectations of future economic growth and inflation, nominal GDP, rather than raising interest rates and shrinking table。
Understand this, you can see why the 13-year Fed QE exit guide expectations, 16-year secondary rate hike when the US debt are rising rapidly, but instead, in the 04 – consecutive rate hike in 2006, when, in 15 years for the first time to raise interest rates when, and why to start in Q2 17 years continuous guide table shrink the expected time, but US bond yields did not rise significantly in the。
  Therefore, looking ahead, after the current US bond yields have been fully screened recent upward inflation expectations and interest rates three times, the future no matter how the Fed said, how do keep an eye on inflation expectations and real GDP growth, the US debt is judged yields thus a key global asset categories。   2, A-share impact from trade wars to see the current route of least resistance Sino-US trade war is the greatest uncertainty, we judge its impact on A shares, there are two ways: First, the current year exports accounted for GDP growth part of the amount in about%, and greater than before to enhance the rate is key to the economy over the past year to maintain the toughness, the future of Sino-US trade war if the difference is expected, investors will inevitably reduce the expected growth is not conducive to cyclical stocks。
Opportunity cyclical stocks may be expected that the difference game。   Second, the United States lifting trade barriers, high probability will make the domestic price rise, thus pushing up inflation, if the United States at this time of real economic growth remained stable, the nominal economic growth will be significantly improved, the eventual US bond yields again on stairs。 The result of this situation will further increase this year, the volatility of global equity assets, including A shares resulting inflow of funds will be reduced, even out。 According to central bank data, the size of foreign holdings of A shares increased significantly over the past year 550 billion, nearly double the overall level, a lot of these foreign capital inflows consumer white horse, led to this type of stock in the last year formed the Davis Double-click the trend opportunity。 Looking ahead, signs of loosening foreign investment once, then the White Horse shares may continue to trade under the crowded impact of the global risk assets turbulent。
  From the point of view style four categories (financial, period, consumption, growth), we still believe that the financial and annual growth is the path of least resistance。 Meanwhile, the financial backing honesty warehouse, grow surprisingly obtain α configuration has not changed ideas。
    3, one of the key factors that determine the style: the relative change in the performance of "changes in relative performance" is one of the key factors that determine the style。 For example, the board's performance dropped from 15% at the end of 2013 to early 2016 -%, while the performance rose from% to 41%, forming a "relative performance scissors" in favor of a growth style。 Subsequently, the board's performance from the beginning of 2016 – Quick rise to 17% in Q3 of percent, while GEM mean fell sharply from 41 percent 24 percent, so he formed a highly conducive to the "relative performance scissors"。   Look ahead, according to our calculations (as shown below), the motherboard earnings growth will appear a more significant decline, while the GEM refers to earnings growth is expected to remain relatively stable, and therefore, this change will be beneficial to relative performance style gradually shift growth。
With leading-than-expected performance, growth "surprisingly" is moving from a risk appetite to drive the secondary drive performance。
  The next period of time, the performance of growth stocks will usher in a centralized test。
From the expected level, we believe the market has reached a consensus on two aspects: first, the performance of a high probability of small stocks to be differentiated, scattered remains poor stock performance will be poor; second, had to rely on continuous extension of mergers and acquisitions remain high growth companies, especially in the recently concluded commitment to performance, performance is also a high probability to appear risk。 The two types of institutions will not touch most of the stock, so if the situation Baolei performance of these stocks appear in the future, at most, produce short-term emotional disturbance growth style while bringing down growth style, but the formation of such a situation a better opportunity to participate。
Therefore, the growth style of the key lies in the continuity of the performance of circumstances leading growth stocks, which we will follow closely track。
  As shown, a key factor in the decision style = 4: From the perspective of long-term interest rate point of view, changes in interest rates trend determines the size of the stock (the value of blue-chip) and small stocks (growth stocks) relative valuation changes, when the interest rate trend of up time, the valuation of large stocks more dominant, when interest rates trend downward phase, small stock valuation is more dominant。
  Since 2017, ten-year bond yields experienced three rounds of rapid ascent, the beginning of January to February, April-May and early October so far。 There factor of economic fundamentals, there is the impact of financial deleveraging, but also inflation expectations interference, but the key question is not explained in the past, but the prospect of 18 years, nearly 4% of the level of interest rates could gradually from the highs?  From the nature of the problem, the interest rate is the price of money, the price is decided by the supply and demand for money, the supply from the central bank, is relatively stable, small fluctuations; demand from the household sector, the financing needs of the corporate sector, government departments。   So interest rates may be in a relatively short period of financial period (second half of the money shortage for 13 years, 16 – 17 years of financial deleveraging) affected, but eventually to return to fundamental factors, namely the financing needs of society as a whole。   Whether China's data, the data or the United States, changes in the financing needs of the community have good explanatory power and leading the trend of ten-year bond yields。
Logic that: (1) when the financing needs of the rapid increase of the time, one could push up inflation, leading to overheating of the economy, on the other hand rising levels of leverage may lead to risky debt, the central bank after seeing such a situation, often monetary policy began to shrink or release the corresponding signal, so a lot of traders began to sell bonds, interest rates upward。
  (2) When the financing needs of rapid decline, the economy will fall in later, so the fundamentals are no longer supported continued at a high level of interest rates。 In addition, the down fall means that the demand for loans and financing needs of price (interest rate), for the banks, loans declined attractive configuration, and configuration to enhance the attractiveness of bonds, after a lot of money to start the configuration bonds, interest rates will He started down, on this logic more in-depth discussion refer to the day the wind fixed income research team Sun Binbin。   In the following two graphs, we use monthly credit balance plus the growth rate represents the total amount of bonds outstanding debt is calculated from the monthly financing needs of China, with the growth rate of the total national debt of the United States on behalf of the financing needs to be more clearly observed financing the growth rate of demand for the ten-year bond yields have better explanatory power and leadership。
  Thus, while there may be twists and turns (financial deleveraging), but the direction of the interest rate decline is relatively certain, because during the current economy as a whole in order to leverage the core strategy of the background, the financing needs of state-owned enterprises and local governments will fall further, the final will drive interest rates down back to basics。   Risk Warning overseas inflation continues to weaken; global economic trends; Sino-US trade war。