Risk warning: This article is a reprinted article. The views mentioned only represent personal opinions. The subject matter involved is not recommended. If you buy and sell it based on this, you are at your own risk.
Author: Haiyang Life
Source: Snowball
22 quarter ended in the third quarter. Instead of being anxious about floating losses, it is better to find targets with relatively high cost performance at present. Although high cost performance does not guarantee that the decline will be stopped immediately, there is historical experience to learn from and can always remind us not to operate blindly.
stock bond spread model (also known as the Fed model, FED is the Federal Reserve) is a relatively commonly used model to evaluate the cost-effectiveness of equity assets . The cost-effectiveness here is obtained by subtracting the risk-free rate of return (usually using the 10-year Treasury bond yield of secondary market ). It is usually negatively correlated with the index trend. When the stock index falls, it will rise, indicating that the cost-effectiveness of equity assets is increasing, and vice versa. The FED model is known as the " bottom-buying indicator ", and many investment institutions use it as a reference indicator for equity positions .
The relationship between cost-effectiveness and future returns is that many people have their own "imaginations", and most people think that the two should be positively correlated. Instead of imagining, you might as well quantify it: superimpose the index's stock and bond cost-effectiveness curve with the yield in the next year, and the relationship between the two will be clear. Since historical data cannot "deduce" the future, the latest data is as of one year ago.
Let’s take a look at the cost-effectiveness of the four mainstream broad-based indexes as of the end of September (blue curve in the figure) and the yield rate of the next year (red curve) of the next year. The horizontal line in the figure is the mean ±1 and ±2 times the standard deviation of the cost-effectiveness.
1. CSI 300
CSI 300 is an blue chip stock index. Its current cost-effectiveness has exceeded one standard deviation above the mean, and is approaching 2 standard deviations, and has obviously made great strides beyond the level at the end of April this year. This is running faster in mainstream indexes, indicating that CSI 300 index was pressed down again without rebounding from April to July.
The yield data of the Shanghai and Shenzhen 300 Index in the next year is positively correlated with the cost-effectiveness data as a whole, especially the two peaks in 2018 and 2010, which is simply "god synchronization". As of the end of September last year, the yield of the Shanghai and Shenzhen 300 Index has already bottomed out in the future. Friends who know how to analyze the technology can predict the future.
2. CSI 500
CSI 500 is a mid-cap stock index. Its stock-to-bond cost-effectiveness exceeded 2 times the standard deviation at the end of April. Looking back now, it is an excellent opportunity. Subsequently, the CSI 500 began a rebound, quickly digesting the cost-effectiveness brought by the sharp drop, and fluctuated to "bottom" near 1 times the standard deviation. Now, its cost-effectiveness is still 1/3 above 1 times the standard deviation, which is still far from 2 times the standard deviation. Mainly, the CSI 500 fell relatively small in the third quarter, and coal contributed significantly.
As of the end of September 2021, the yield of CSI 500 is still falling in the next year, and there is no intention to stop the decline. Judging from the decline pattern, the situation in 2021 is similar to that in 2017. That’s right, this actually means that the situation in 2022 and 2018 is similar.
3. CSI 1000
CSI 1000 Index is a small and medium-sized index. Its current cost-effectiveness has reached its end of April, but it has not surpassed significantly. This is all the "credit" of the decline in the third quarter. Although the horizontal comparison between indexes is not very "objective", some "clues" can still be seen from the distance between 1 times or 2 times the standard deviation - the cost-effectiveness of CSI 1000 is 2/3 above the standard deviation of 1 times, which is closer to the 2 times standard deviation than CSI 500 Index . From this perspective, the CSI 1000 Index is currently more cost-effective than the CSI 500 Index.
As of the end of September 2021, the yield of the CSI 1000 Index is still falling rapidly in the next year. Like the CSI 500 Index, there are no signs of bottoming out.
4. National Certificate 2000
National Certificate 2000 is a small-cap stock index. From the perspective of cost-effectiveness, it has just recently crossed the positive 1-fold standard deviation from the bottom, and there is still a gap from the level at the end of April, and there is almost "1 standard deviation" from the positive 2-fold standard deviation. After the sharp drop at the end of April, the cost-effectiveness was only in the middle of the standard deviation of positive 1 and positive 2 times, indicating that in recent years, the 2000 of the National Securities 2000 has not reached an extremely cost-effective level. Small-cap stocks have experienced several years of good times, which is exactly the same as the "spring" market for blue-chip stocks from 2016 to 2018.
As of September 24, 2021, the yield of the National Securities 2000 Index is still falling rapidly in the next year, similar to the CSI 500 and CSI 1000, and there is no bottom signal yet.
summary
1. Judging from the current index cost-effectiveness data, only the Shanghai and Shenzhen 300 is closest to the positive 2 times standard deviation, and is obviously more cost-effective than after the sharp drop in late April. Compared with its own history, the Shanghai and Shenzhen 300 is currently very cost-effective, while the other indexes still have "space". The reason for this space may be that it has risen a lot in the previous period, or it may be that the performance decline has led to an increase in PE.
2. CSI 500, CSI 1000 and CSI 2000 indexes have not stopped falling yet, causing the index's yield to fall rapidly in the next year as of late September last year, while the index's cost-effectiveness in late September last year did not fluctuate greatly. This shows that the correlation between the cost-effectiveness of bonds in index stocks and the yield in the next year is still relatively high in extreme market conditions.
3. Some people say that the stock-to-bond spread model has expired now, which is actually because the model is too high. You should know that no model can accurately predict all market conditions. If so, it must be in a dream. The FED model does not have much indication function in normal times, but it can still be referenced in extreme market conditions, because the idea behind this model is that investors will make adjustments to investment decisions based on the relative cost-effectiveness between major assets. The adjustment will not happen every moment. It must wait until it is prosperous and declining, and the worst is bad. So, its underlying logic is actually a cyclical law.
Data source: wind, as of 20220930
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