Macro group.
1. Economic data review in April 2024. Conclusion and outlook: this year's 430 Politburo meeting affirmed the economic performance since the beginning of the year, believed that positive factors had increased and a good start had been achieved, but still maintained a positive policy tone, and did not show an obvious policy shift due to the "good start" of the economic data in the first quarter, In addition, the policy trend towards real estate has shifted from the supply side to the demand side, highlighting the urgency of stabilizing the real estate. The main reason is that the real estate related industry chain is still a major drag on the current economic growth. As we mentioned in "Who will take over the export chain?", the export chain is still strong this year, but next year some overseas industries may enter the final stage of the capital expenditure cycle. The global inventory cycle will also shift from passive replenishment to active de stocking, and the probability of China's foreign demand will decline. The improvement of domestic consumption is highly deterministic, but the slope is relatively slow, and there are large differences between different age/income/occupation groups. At present, the growth rate of real estate investment in domestic demand has been at a low level for many consecutive months, and the sensitivity of real estate investment to policies is significantly higher than consumption. From the perspective of size and elasticity, only when the real estate industry stabilizes can it take over exports to resist the downward pressure on the economy.
2. The high valuation of US stocks is difficult to digest through interest rate cut, and once the economy slows down, there will be great downward pressure. Although monetary policy and AI theme have helped US stocks, the macro background of the continuous surge of US stocks since 2020 is that the balance sheet and cash flow statement of residents are extremely healthy to boost demand, and the momentum of the US economy has been elongated under the pressure of Made in China to help alleviate inflation. In the future, although the easing of inflation has brought interest rate cuts closer, it also means that demand is slowing down. In addition, the 10-year cyclically adjusted P/E ratio of S&P 500 Schiller is near the second highest level in history, and it is difficult to ease the pressure of overvalued US stocks by simply cutting interest rates. At the same time, the import cost will also rise after the imposition of tariffs on China. As we pointed out in our report "Is the Adjustment of US Stocks Over?" on April 24, interest rate cut may be the starting point for the decline of US stocks.
Policy group.
1. Since this year, the overall market has bottomed out and recovered. However, compared with the past few years, there are at least quarterly main line investment opportunities. This year's industry and main line rotation speed has significantly accelerated. The market has successively seen high dividends, AI computing power, exports to the sea, global commodities, low altitude economy, real estate and other sectors or main lines that have soared, but the sustainability is not very strong. We estimate that there are several key reasons as follows: 1) The current profit is generally stable, and there is no clear direction and driving force for continuous performance improvement. 2) The "scar effect" or "scared bird mentality" caused by the sharp drop from the end of last year to the beginning of last year; 3) Since this year, the policy strength has been significantly increased and the policy efficiency has been significantly improved; 4) This year's incremental funds are relatively limited, and the characteristics of stock game are still obvious, lacking the positive feedback of continuous increment.
2. From a medium - and long-term perspective, we suggest paying attention to the global emphasis on the rise of the carbon neutral whole industrial chain (photovoltaic, wind power, energy storage, hydrogen energy, etc.), the increase of the penetration rate of electric intelligent vehicles under the general trend of electrification and intelligence, and the industrial trends of digital economy, artificial intelligence, metauniverse, and self control.
