First of all, we need to understand a question, which factors are related to the rise and fall of stock indexes: the central bank's interest rate. The Ministry of Finance began to reduce taxes on enterprises and residents, boosting corporate confidence and residents' consumption

Summary

Why is it said that the rise or fall of the stock index is related to the two factors of cycle and leverage ratio? First of all, we need to understand a question. What factors are related to the rise and fall of the stock index: the central bank's interest rate, the Ministry of Finance's tax cuts or expanded expenditures, the GDP of the Bureau of Statistics, PMI, CPI, the unemployment rate, the consumer confidence index and Business confidence index, foreign exchange rise and fall expectations, bond income expectations, commodity price expectations, real estate investment sales growth. In addition to the above factors, it is important to note that one of these factors is the leverage ratio, which determines the degree of expectations of the entire market.

The above factors are the main indicators looked at by major investment banks, such as Morgan Stanley, Morgan Stanley, Goldman Sachs , etc. They are all paying attention to these major factors that affect the stock index, but we laymen rarely pay attention to these. If companies, residents, and the stock index are all increasing leverage, then the price-to-earnings ratio of the overall stock index may reach 30 times. If everyone is reducing leverage, then the overall price-to-earnings ratio of the stock index may be only 15 times. To put it bluntly, it is a matter of whether the stock price of a stock is 100 yuan or 50 yuan in different cycles (based on the situation that the company's business and management team do not undergo drastic changes).

A-shares are currently in a bear market (a fall of more than 20% is a bear market), so how to save the stock index? The currency has shifted from tight monetary policy to targeted easing, with targeted industries increasing leverage; the Ministry of Finance has begun tax cuts for businesses and residents, boosting corporate confidence and residents’ desire to consume, and businesses and residents increasing leverage; expectations for RMB depreciation have been stabilized, from depreciation expectations to appreciation expectations, and the currency Increase leverage; reduce bond financing costs, bonds increase leverage; stabilize real estate prices, curb the sharp decline in housing prices, and stabilize real estate leverage. The changes in the above five factors are all reducing the downward pressure of the cycle, while stabilizing the overall leverage. The six major factors work together to stabilize the stock index market.

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Argument: Saudi Arabian Stock Index = C*L (Cycle * Leverage Ratio)

In fact, this formula did not originally only have two factors: cycle and leverage ratio. It was reduced to 2 just to make it easier to remember. The original company is:

Saudi stock index = (0.2R+0.15T+0.4S+0.05C+0.1B+0.05P+0.05RT)*L

R represents the central bank’s interest rate, and 0.2 represents its weight of 20%; of course, the central bank’s operations include lowering For quasi and open market operations, R represents the overall cycle of the central bank, whether to release water, tighten, or remain unchanged.

T represents the Ministry of Finance, and 0.15 means that its weight is 15%. The Ministry of Finance includes two items: tax cuts and expansion of expenditures, which is the so-called active fiscal policy, or it may remain unchanged.

S represents the Bureau of Statistics, including GDP, PMI, CPI, unemployment rate, consumer confidence index and business confidence index. 0.4 means that its weight is 40%.

C represents the exchange rate , which means whether a country's currency is in a depreciation channel or an upward channel. 0.05 represents its weight of 5%,

B represents bonds, and 0.1 represents its weight of 10%.

P represents the commodity price, or the price of PPI. 0.05 represents that its weight is 5%.

RT represents real estate, and 0.05 represents that its weight is 5%.

L stands for leverage.

Ok, the overall factors have been explained, let’s look at the arguments.

. What is the relationship between interest rates and the stock index market? An increase in interest rates means that the central bank begins to tighten, and a decrease in interest rates means that the central bank begins to loosen.

Comparison of U.S. interest rates and stock indexes

We can see that in normal years, when interest rates increase, the stock index is on a downward trend; when interest rates decrease, the stock index is on an upward trend. However, since interest rates do not completely determine the trend of the stock index, there are simultaneous increases in some places. They fell at the same time, such as the Internet bubble in 2000 and the subprime mortgage crisis in 2008; in some places, they showed no correlation.

R=(R1-R2)R2

Assume an anniversary, R2 is the value at the beginning of the year, R1 is the value at the end of the year, (R1-R2)R2 represents the changes in market funds within a cycle. RT represents the capital changes in this cycle, RY represents the capital changes in the previous cycle, then R=(RT-RY)/RY represents the month-on-month capital changes.

R={( RT1-RT2)RT2-( RY1-RY2)RY2}/( RY1-RY2)RY2

In China, in addition to interest rates, the central bank’s overall monetary situation also includes RRR cuts and open market operations. All capital changes will eventually Appears in the M1 and M2 variations.

M2={(MT1-MT2)MT2-(MY1-MY2)MY2}/(MY1-MY2)MY2

The year-on-year growth of M2 in 2016 was 11.3%, and in 2017 it was 8.2%, a month-on-month decrease of 27%.

. What changes have occurred in the Ministry of Finance and the stock index market? If the Ministry of Finance expands investment, it will boost GDP. If taxes are cut, it will reduce corporate tax rates and resident tax rates.

Comparison of corporate tax rate and stock market

From the figure, we can see that if the corporate tax rate becomes lower, then the stock index will go up, and if the corporate tax rate becomes higher, then the stock index will go down. This is the same as the previous formula. Assume that within a certain period, the company's tax rate is T, then in the chain period: T=(T1-T2)T2

In 2016, the fiscal public budget revenue increased by 4.5% year-on-year, and in 2017, the fiscal public budget revenue increased by 7.4% year-on-year. %, a month-on-month increase of 64.44%.

. What changes have occurred between the Bureau of Statistics data and the stock index?

) Changes in GDP and stock index

Comparison of GDP and stock index

Under normal circumstances, if GDP grows faster, the wealth of society will increase, and the corresponding stock market value will naturally increase. But it still depends on the main factors that drive GDP. What, consumption, fixed investment , import and export, government consumption and investment. consumption is definitely the most efficient, followed by fixed investment. This fixed investment is not infrastructure, but corporate and private fixed investment. Infrastructure is government debt investment, import and export drive GDP third, and the worst is government consumption and investment. , because the government's expansion of consumption and expenditure must be based on taxation. If taxes increase, residents and corporate profits will decrease. If taxes remain unchanged, the government must borrow money for expansion.

If the month-on-month growth of GDP is increasing, the stock index will rise. If the month-on-month growth is declining, the stock index will fall.

G=(G1-G2)G2

In 2016, GDP increased by 6.7% year-on-year. In 2017, GDP increased by 6.9% year-on-year and 2.9% month-on-month.

) Changes in PMI and stock index

This change is not particularly obvious, but if the PMI is in the rising stage, it indicates that the economy is in a period of strong expansion, and the stock index rises. If the PMI is in the declining stage, it indicates that the economy is expanding moderately. If the PMI is low, it indicates that the economy is in a period of strong expansion. If it is above 50, it indicates that the economy is in a contraction stage.

) Changes in CPI and stock index

This change is not particularly obvious. If the CPI is below 2% and the CPI rises, the stock index is in the rising stage. If the CPI falls, the stock index is in the declining stage; if the CPI is higher than 2%, the CPI If the CPI rises, the stock index may be in the declining stage. If the CPI falls, the stock index may be in the rising stage.

Comparison of CPI, PPI and stock index

) Changes in the unemployment rate and stock index

This change is not particularly obvious, but if the unemployment rate is in the declining stage, the stock index is in the rising stage, and if the unemployment rate is in the rising stage, the stock index is in the declining stage.

5) Changes in the consumer confidence index and stock index

The consumer confidence index represents residents’ consumption expectations. If the index is in the rising stage, it indicates that consumers are very enthusiastic about consumption, and the stock index is in the rising stage. If the consumer confidence index is in the declining stage , indicating that consumers’ willingness to consume is not strong, and the stock index is in a declining stage. The U.S. consumer confidence index currently reaches 106, and the SP500 index has also reached 2,800 points.

Consumer Confidence Index and Stock Index

6) Changes in Business Confidence Index and Stock Index

Business Confidence Index represents companies’ expectations for the future economy. If the business confidence index is in the rising stage, it indicates that companies have relatively good expectations for the future economy and will begin to expand production. and recruiting employees, the stock index is in the rising stage. If the business confidence index is in the declining stage, it indicates that the company has poor expectations for the future economy, and the company will not make any investment, then the stock index will be in the declining stage.

5. What is the relationship between exchange rate and stock index?

From the picture, we can roughly see that if the US dollar is strong, the stock index will also rise, and if the US dollar is weak, the stock index will also fall.

The exchange rate here indicates whether a country's currency is in a depreciation channel or an appreciation channel. If the currency is in a depreciation channel, it will lead to the outflow of foreign capital, and foreign capital will not allocate more to the stock market, because you have to consider the risk of currency depreciation; if a country's currency is in an appreciation channel, it will attract foreign investment, and foreign investment will also Start allocating stocks, because in addition to the income from stocks, the appreciation of the currency may also be an income.

For example, if you exchange USD to RMB at 1:7, and you play in China for 1 year and spend 1 million, and after 1 year it becomes 1:6, you will still have 1 million USD when you exit. . On the contrary, if you do nothing, you will lose 1 million.

Therefore, if the currency is strong, the stock index will be in an upward stage, and if the currency is weak, the stock index will be in a downward stage.

6. The relationship between the bond market and the stock index

The bond market mainly looks at the interest rate of 10-year treasury bonds, and of course it also depends on the interest rate of corporate bonds.

Comparison of 10-year treasury bonds and stock indexes

From the figure, we can see that if the cost of financing in the bond market is high, companies will increase financing costs to reduce profits and inhibit the company's reinvestment behavior. Therefore, when bond financing becomes high, companies begin to use stock pledges to raise funds. This will increase corporate debt risks in the downward channel of stock indexes, turning into a pattern of more than more.

When bond yields are low, the stock index is in a rising stage; when bond yields are high, the stock index is in a declining stage.

7. The relationship between commodities and stock indexes

The relationship between commodities and stock indexes is not very obvious, and a lot of data on this is contradictory. Commodities are mainly affected by changes in supply and demand. If the price of commodities rises, it means that the market is hot, but it will also reduce the profit margin of enterprises and force them to increase prices, causing the entire society's products to rise. Therefore, in the early stage of the rise of commodities, the stock index is in the rising stage. In the later stage of the rise of commodities and the subsequent decline, the stock index will be in the declining stage.

8. The relationship between real estate and stock index

Comparison of real estate and stock index

When real estate investment and sales increase, it means that residents and businesses are increasing consumption, and the stock index is in the rising stage. If, real estate investment and sales begin to decline, the stock index is in the rising stage. Descending stage. Real estate gathers most of society's assets. If real estate investment declines, housing prices will decline accordingly, which means your assets begin to shrink, and your liabilities will naturally increase, compressing consumption and investment in the entire society.

The relationship between leverage ratio and stock index

What we talked about earlier are cyclical factors, and the leverage ratio is based on cyclicality. Even if the economy is stable, an economic crisis may occur due to leverage.

The U.S. leverage ratio and the stock market situation

The U.S. stock market has been increasing leverage since 2009, leading to a 10-year bull market in the United States. It has been reducing the leverage ratio from 2006 to 2009, leading to a three-year bear market.

Corporate leverage ratio, resident leverage ratio, and investment leverage ratio will all affect the price of the entire social asset.

In the early stage of increasing leverage, the company's assets will increase faster than its liabilities, which will lead to an increase in net assets. If the return on net assets remains unchanged, profits will increase and the stock will be on the rise; after the company's leverage ratio reaches a certain proportion , deleveraging begins. At this time, the rate of increase in assets will be less than that of liabilities, causing the company's leverage ratio to continue to passively increase while the company's assets remain unchanged.

The changes in the leverage ratio of residents and investments are the same as the increase in corporate leverage. In the early stage, assets increased, and in the later stage, liabilities increased passively.

Therefore, we must understand that the entire economy is in the stage of increasing leverage and deleveraging, and it is crucial for us to clearly understand the price of assets.When the assets remain unchanged, the leverage may be worth 100 yuan, but when the leverage is deleveraged, it may only be worth 70 yuan.

Summary:

Regarding the proportion, this is only a personal estimate of the proportion, because there are many connections between each factor. At present, all the economic masters in the world have not come up with this formula. Naturally, I will not be able to do so in the short term. Accurately prove the accuracy of this formula.

Only by clearly understanding the factors that affect the entire stock index can we know how to control the stock market. The two major factors are cycle and leverage ratio. When the cyclical factors are in the downward stage, we cannot deleverage anymore, otherwise the stock index will plummet. We can only stabilize the leverage and increase the leverage. However, the large cyclical factors are in the deleveraging stage. Therefore, only by stabilizing leverage can we alleviate the continued decline of the stock market. Therefore, Central Bank Governor Yi Gang said that China has now shifted from deleveraging to stabilizing leverage. The remaining question is how to adjust for the downward trend in cyclical factors?

1. The currency has shifted from tight monetary policy to targeted easing, with targeted industries increasing leverage;

2. The Ministry of Finance has begun tax cuts for businesses and residents, boosting business confidence and residents’ desire to consume, and businesses and residents are increasing leverage;

3. Stabilizing expectations for RMB depreciation, and reducing expectations for depreciation. Turn into appreciation expectations, currency plus leverage;

4. Reduce bond financing costs, bonds plus leverage;

5. Stabilize real estate prices, curb the sharp decline in housing prices, and stabilize real estate leverage;

The Bureau of Statistics cannot influence statistics, it can only rely on data When things go badly, call the central bank and the Ministry of Finance to take measures to save things. The changes in the above five factors are all reducing the downward pressure of the cycle, while stabilizing the overall leverage. The six major factors work together to stabilize the stock index market. Do you feel that these 6 major factors are being implemented, the attempted price reduction of house prices (Hefei real estate companies originally planned to reduce house prices by 6,000 yuan, but were added back by the Housing and Urban-Rural Development Talks), private enterprise bond investment support tools, Hong Kong’s issuance of central bank bills, private Business symposiums, tax cuts for residents, and central bank governor Yi Gang's leverage-stabilizing announcements. The state will definitely take heavy action on these six factors to stabilize the stock index market.

welcomes more discussions. In the next article, we will write about the investment magic weapon from the perspective of the chief economist: the two point three horizontal, four column and five vertical method!