01, Inflation Path Unclear
Currently, some economic data related to inflation in the United States are extremely contradictory, which has also led to indecisiveness in the U.S. capital market.
The day before yesterday, the U.S. Department of Commerce released the PCE price index, a figure that garners more attention from the Federal Reserve.
The latest PCE year-on-year reached 6%, a decrease of 0.2 percentage points compared to September, but it is still three times higher than the U.S. inflation target of 2%.
Moreover, the month-on-month data compared to last month is still increasing. From this perspective, inflation has not shown a clear decline, but at least it has not continued to climb significantly, which is a good thing.
However, unexpectedly, another set of data was announced yesterday, giving a contrary impression. The latest non-farm employment data was significantly higher than expected.
The market originally believed that there would be an increase of 200,000 jobs, but the recently announced figure reached 262,000.
The strong growth in the job market implies that wages will continue to rise, thereby stimulating further increases in prices. It seems that inflation in the United States is easy to rise but difficult to fall, and the Federal Reserve is once again in a dilemma about how to raise interest rates in the future.
02, Downward Trend in U.S. Stocks
Now the market's focus on the Federal Reserve's interest rate hikes has shifted from the magnitude of the rate hike to the duration of the rate hike.It appears that the interest rate hike in December is very likely to be reduced to 50 basis points, and it may even further decrease to 25 basis points next year. However, with inflation remaining high, the cycle of interest rate hikes is likely to be significantly extended.
As a result, many American investment banks have expressed a pessimistic outlook for the stock market next year. Recently, the media conducted a survey of 17 financial institutions in the United States. A small number of institutions predict an increase in the U.S. stock market next year, with the maximum predicted increase reaching 10%. However, more institutions are bearish on the U.S. stock market for next year, believing that the decline could reach up to 25%.
The most pessimistic forecasts are mainly due to a lack of confidence in the U.S. economy. Affected by the economy, the average profits of listed companies may significantly decrease by 11%. Moreover, the continuous tightening of market funds will also lead to a decrease in price-to-earnings ratios.
Under the dual impact of declining profits and decreasing price-to-earnings ratios, the U.S. stock market will continue to decline.
03, Buy Chinese Assets
While the U.S. stock market is performing poorly, Chinese assets have seen a significant increase. At the close on Friday, Chinese concept stocks continued to rise significantly, with new energy vehicles such as NIO, XPeng, and Li Auto all increasing in sync. Among them, XPeng's increase exceeded 14%, while Li Auto and NIO's increases exceeded 7%.
Zhihu's increase actually reached 31%, and Bilibili is still on the rise, increasing by 16% again last night.The rise of Chinese concept stocks has been sustained for a period of time.
Starting in March of this year, the U.S. Securities and Exchange Commission issued trading warnings for almost all Chinese concept stocks, and with the continuous decline of the U.S. stock market, Chinese concept stocks also suffered a significant drop in stock prices.
However, during this period, we have observed a very clear phenomenon: the rebound of Chinese concept stocks has far exceeded the three major U.S. stock indices.
Currently, starting from the lowest rebound point, the highest increase of the Dow Jones Industrial Average has just exceeded 20%, but the NASDAQ Golden Dragon China Index has already increased by more than 60%.
Among all Chinese concept stocks currently, the one with the highest increase rose by 380% in November. There are as many as 30 publicly listed companies with an increase of more than 50%, among which 5 have successfully doubled in just November.
In addition to funds continuously buying Chinese assets in the U.S. stock market, in the past month, the Chinese yuan has also been continuously rising in the foreign exchange market. In November alone, the offshore exchange rate of the Chinese yuan against the U.S. dollar has risen by 2,900 points, and if it reaches the highest point on Friday, the increase even expands to 3,700 points.
The future trend comparison between China and the U.S. economies is clear at a glance.