The US stock market four consecutive Yang, the global major market rebound, help A share after the counter-attack horn?What is the impact of previous interest rate hikes on US stocks and A-shares?

2022-06-02 0 By

Financial Union (Shenzhen reporter, Cheng Mengqi) news, during the Spring Festival holiday, daily gossip can not leave the Spring Festival Gala and national football team, the national football team lost to Vietnam 1:3 on the first day of the New Year, online complaints, there are also shareholders said that is not uncommon, said that the Vietnamese stock market and A shares in the past 5 years is 6:1.Although A shares did not open the door, is still the most nervous in the hearts of shareholders.A shares closed during the periphery of the stock market has become A vane, the United States is in A shares closed these days, out of the four Yang.Before the Lunar New Year, due to the impact of the Federal Reserve tightening expectations, the US stock market has entered A continuous adjustment period since January 2022, and a-shares have also been affected.Now, the US stock market continues to rise in the Lunar New Year, some netizens say, “Did the A-share market fall in vain?”The continuous rise of the US stock market and the repair of the major markets, so that the holiday stock people can not sit still, have begun to discuss how the US stock market will go next, and after the holiday can A rebound?In January 2022, the Dow Dropped 3.32%;The tech-heavy Nasdaq fell 8.89%, its worst performance since March 2020;The S&P 500 lost 5.26%, second only to March 2020 and its worst January since 2009.The turning point came on the last day of January.The three major U.S. stock indexes rebounded that day and rose for the first two days of February.The DOW Jones Industrial Average rose 1.65%, the Nasdaq 3.13% and the S&P 500 2.43%.The biggest gains came on Jan. 31, when the Nasdaq rose 3.41%, the Dow 1.17% and the S&P 500 1.89%.On Feb. 1, the Dow was up 0.78%, the S&P 500 was up 0.69% and the Nasdaq composite was up 0.75%.Chinese concept stocks rose, with IQiyi up 11.03%, Bilibili up 1.70%, Alibaba up 1.14%, Baidu up 0.85%, up 0.27% and Weibo up 0.17%.On February 2, the S&P 500 rose 0.94%, the NASDAQ rose 0.50% and the Dow rose 0.63%.Google rose 7.52%, Microsoft 1.52%, Qualcomm 6.25%, AMD 5.12% and Nvidia 2.45%.In the face of a fourth straight positive day on Wall Street, some analysts said the Fed’s hawkish approach dominated the market in January, until earnings season finally returned to focus on corporate performance and created more optimism.Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said: “The economy is doing relatively well, with GDP growth well above normal, a strong job market and strong consumer and business balance sheets.But the headwinds from fed rate hikes and balance sheet reduction are strong.I think investors are trying to determine what is the right level to buy on dips, but also to make sure they are prepared for the volatility that may lie ahead.”As a result, Zaccarelli said there is a greater tendency to reposition to high-quality, profitable companies, finding opportunities in sectors such as finance and energy.But there are different views in the market, like Bridgewater.In its 2022 outlook, Mr Bridgewater said: “The market is expecting inflation to fall smoothly back to the low levels of previous decades, assuming this will happen naturally without aggressive central bank policy action, and we see future evolution and current expectations colliding.”The flood of money and credit injected during the pandemic has now produced a self-reinforcing cycle of high nominal spending and income growth that is unlikely to cool without aggressive monetary tightening, Says Mr Bridgewater.For investors, there are two distinct risks relative to the past 40 years: first, the risk that asset values will fall in real terms as inflation continues to rise.Second, Fed policy has fallen further behind inflation developments and has had to play catch-up aggressively.In the short term, policy easing will tend to have a benign effect along the lines of medium-term transition.Too much policy delay, however, risks overextending these measures, lowering yields and lengthening maturities, greatly increasing the long-term risk of falling behind and catching up.Bridgewater is “significantly less bullish” on financial assets in the developed world.By contrast, Beijing has found Chinese assets more attractive as it has launched policies to stimulate the economy.So does Goldman Sachs.Goldman sachs ‘ScottRubner, in his latest “tactical cash flow” report, summed up the year to date, saying the consensus remains bearish until stocks can continue to rise during the day without turning negative at the close.At the same time, he believes the market is not yet ready to go from ‘red light’ to ‘green light’ because the first trading week in February, which coincides with the Chinese New Year, creates extremely low liquidity, the sell the recent rally trading pattern remains in place, and the first trading day in late January and February is usually a key turning point.There was no “good start”, A shares experienced A “bad January” on the one hand, A share investors “sigh at the ocean”, watching the US stock market rose during the holiday, scolding each other “do not speak martial ethics”;On one side are U.S. funds that prefer Chinese assets.Each side seems to have a point.January 2022 has been a torrid start for investors.During the month, chinext fell 12.45%, the lowest among the world’s major indexes;The Shanghai composite index fell 7.65%, more in one month than it gained in all of 2021.However, the Shanghai Composite Index rose 22.30 percent, 13.87 percent and 4.80 percent from 2019 to 2021.The growth enterprise Market is even worse, with a three-year increase of 43.79%, 64.96% and 12.02% respectively.Notably, northbound inflows, known as “smart money”, hit a record high in 2021.In 2021, northbound capital realized 432.169 billion yuan of net inflows, including 193.727 billion yuan through Shanghai stock Connect and 238.442 billion yuan through Shenzhen Stock Connect. The annual cumulative net inflows increased by 106.85% compared with 2020.It shows that international investors continue to pay attention to the allocation of A share market.In January 2022, A-shares not only failed to get off to A good start, but even experienced A severe decline, but the cumulative net inflow of northbound funds still reached 16.775 billion yuan.Among them, Shanghai stock connect funds net inflow of 18.588 billion yuan, shenzhen stock connect funds net outflow of 1.814 billion yuan.With the gradual emergence of policy effects superimpose the large inflow of northbound capital, Haitong Securities believes that the upward trend of the value plate has not ended, and the late growth plate is expected to follow.However, as major markets around the world begin to rebound over the Lunar New Year holiday, the biggest question for most investors is whether the A-share market will start the year higher.”There are structural opportunities in the A-share market in 2022, taking into account three major factors: economy, capital and stock market valuation.”Zhou Weiwen of The China-Europe Fund said that the probability of a global epidemic recovery is improving and the macro economy will maintain certain growth.China’s growth rate is slowly slowing due to new property starts, a possible gradual resumption of foreign supply chains and destocking.Corresponding to the economic growth trend, the low interest rate environment abroad will change, prices will rise, and the Federal Reserve will withdraw liquidity in the future.China has been proactive in dealing with the epidemic. The central bank’s policy is more forward-looking. Against the backdrop of low macroeconomic growth expectations, the monetary policy will be relatively loose, which will help reduce the volatility of the stock market.At present, after two years of structural bull market, the overall valuation of A shares is not low, there are some structural bubbles, there are also reasonable or undervalued sectors, and there are structural opportunities.How did the US stock market and China stock Market perform during previous interest rate hikes?Since the coming rate hike has the biggest impact on the stock market, how has the stock market performed during the previous rate hike?And how does the Federal Reserve rate hike affect A shares?Dow Jones Market Data results show that since 1989, the Dow Jones Industrial Average has returned nearly 55% on average during Periods of Fed rate hikes, the S&P 500 62.9% and the Nasdaq 102.7% positive on average.That compares with an average return of 23% for the Dow, 21% for the S&P 500 and 32% for the Nasdaq during fed rate cuts.Although the data shows that during the rate hike cycle, the US stock market rose more than fell, but the initial rate hike volatility is inevitable.Goldman Sachs ‘chief US equity strategist notes that in recent Fed rate hikes, the S&P has fallen an average of 6 per cent within three months of the first rate increase.However, within six months of the first rate increase, returns would return 5%.As for A-shares, data from Haitong Securities Research report show that although the a-share market has not been established for A long time, it has also experienced four interest rate hikes in the US stock market.Reviewing the four interest rate raising cycles of the Federal Reserve, it is found that the global stock market tends to fall first and then rise during the fed interest rate raising cycle, while the a-share market is relatively independent.(Credit: Financial Union)