Caution Global stock market rebound was only a flash in the pan - the depreciation of the US dollar triggered changes series
Special researcher of China Foreign Exchange Investment Research Institute Sun Bin
In the past month, the rebound of global stock markets has been quite gratifying, especially US stock has backed to , which has been downward trend in the previous stage. From a time perspective, the time point of the global stock market rebound in this round of rebound pointed directly to mid-October. Stock markets in the United States, Europe, Japan, South Korea, Australia, the United Kingdom and other countries all showed very obvious rebound synchronization. This time point is exactly the time point when the inflation data was released in September in the United States, and it is also the time point when the Federal Reserve said this year that it will slow down the pace of rate hikes in the future.
Therefore, the main factors of this round of stock market rebound are not difficult to understand. First, it is the positive effect caused by the expectation of to slow down by the US rate hike. During the same period, the US dollar index was adjusted due to this impact, but the chain effect caused by this has no direct correlation with the rebound of the stock market. The slowdown in the expectation of US interest rate hikes will inevitably lead to the market's expectation that other countries will follow the decline in the pressure of interest rate hikes, which will induce a phased capital transition and short-term flow. What we are going to discuss today is whether this round of rebound can form a trend reversal in the future. This is bound to affect the three factors of the right time, place, and people, namely whether the global liquidity environment and expectations support the emergence of the bull market, whether the economic fundamentals of major countries and the prospects for global economic recovery have positive expectations, and what kind of attitude global capital has towards the current market.
First of all, the global liquidity environment does not support the emergence of a bull market. The two main factors that show the rise of in the capital market are either the expansion of market liquidity or the market has formed a general consensus on the improvement of economic or corporate fundamentals. At least one of the two factors must be reached. Which one is more important, mostly determines the nature and cycle of the market, and does not determine the direction of the market. The core factor that restricts global liquidity expectations is undoubtedly the global inflation level that is still at a high level. Is the global high inflation problem really coming to an end, and it has even begun to decline? I don't think so. Taking the United States as an example, the crux of this round of global inflation is not on the consumer side, but on the supply side. The appreciation of the dollar caused by the strong interest rate hike of the Federal Reserve has suppressed the price of commodities from the pricing level, and on the other hand, it also lowers the import cost of raw materials and finished products from the import side, thereby comprehensively lowering the inflation level. We cannot see this from the correlation between the US dollar trend and the performance of US CPI data. The time when the U.S. inflation gains slowed down is highly consistent with the time when the U.S. dollar index broke through the 100-point integer mark.
, and the US dollar has turned to depreciation since mid-October, which will undoubtedly have a counterproductive effect on the United States' suppression of inflation, and global commodity prices still have the possibility of repeated recurrence. As a result, the interest rate hikes in the United States will not stop, and the follow-up interest rate hikes in other countries will not stop, and the global environment for capital contraction will not change. Therefore, the rebound of global stock markets in the past month is just a self-rescue behavior caused by capital's temporary slowdown in global liquidity contraction expectations, which can only be characterized as a phased rebound, and the liquidity environment does not support the continuation of the bull market.
Global Economy fundamental expectations are another decisive factor. Although more and more data have recently indicated that the global economic recovery is becoming more and more promising. But judging from the specific data, the situation is still not optimistic. Although U.S. inflation fell to 7.7% in October, this data is still at a high level. And judging from the American series of PMI data released at the same time, the US manufacturing service industry indicators are constantly declining, the manufacturing index is approaching the dividing line of 50, and the service industry indicators have been below 50 for several consecutive months, and other data have not performed well.
More importantly, the disturbances of the US's continued interest rate hikes on the US real economy have begun to be reflected in the data level. Although the unemployment rate remains low, the degree of differentiation of corporate profits is particularly obvious.Judging from the top 10 most profitable companies in the United States, technology and finance companies account for 80%, and the remaining two companies are energy companies. Finance, technology, and energy are all weighted sector of the U.S. stock index. This phenomenon also has similar situations in the stock index composition of other countries. Therefore, the rebound of the stock index, especially the rebound of the US stock market, can only represent the excellent performance of the weighted stock , and cannot represent the recovery and warming of the entire real economy. From this point of view, the fundamentals do not have the foundation of a bull market.
Finally, the rise in the stock market does not fully represent the money-making effect of the market . The reason why we judge the future expectations of the stock market from the rebound of the stock index is not sufficient. As mentioned above, due to the epidemic and the high global commodity prices, there are obvious positive and negative differences for listed companies. Technology, finance and energy companies account for most of the share of profit-making listed companies. For example, Apple's net profit in the first three quarters increased by as much as 65% year-on-year, and Berkshire's net profit doubled, but on the contrary, American Steel Company's , American General Corporation and other major manufacturing players all experienced obvious losses. But we know that the U.S. stock index, especially the leading Nasdaq index and the S&P 500 index , are based on technology, energy and financial companies as weighted stocks. Although the rise of weighted stocks can drive the index, it does not mean that the market has a money-making effect. The attitude of capital is differentiated and does not form a synchronous force.
To sum up, the general rebound in global stock markets in the past month was mainly short-term rebound affected by liquidity expectations, and there is no possibility of a flip. The right time, place, and people do not support the market's development towards a bull market. Structural differentiation is expected to be the main style in the future and even throughout 2023.
