Us stocks made a big correction overnight (Tuesday), with the NASDAQ down nearly 4 per cent, the S & P 500 and the Dow Jones index down more than 2 per cent, and some major index heavyweights, such as Tesla, Inc. and General Electric Co, fell more than 10 per cent.

At the same time, the 10-year US debt fell to 2.73%, and the dollar index rose above 102 Magi VIX to its highest level since the situation between Russia and Ukraine escalated in early March.

Since the beginning of April, the sustained pullback of US stocks has basically given back the rebound in March, once again approaching the low point of the most tense situation in Russia and Ukraine, superimposed by the recent sustained pullback in the Chinese market, indicating that market risks and sentiment are obviously under pressure.

So what is the signal from the recent correction in US stocks, and does it signal the beginning of greater volatility? CICC's comments on the latest fluctuations in overnight US stocks are as follows for investors' reference.

First of all, the volatility of overnight US stocks is affected by multiple factors, but it can be seen from the combination of falling stocks and rising bonds that more attention has been paid to the Fed's tightening than in the previous period. Recently, it has gradually turned to trading concerns about the decline in economic and earnings fundamentals and even the risk of recession.。It is mainly reflected in:

1) US stocks will announce the results of major technology leading companies this week, and the market is worried that the overall performance will be lower than expected. Under the background that the Fed's tightening will lead to valuation pressure, the market will lose a few dependencies.

2) the Federal Reserve tightening is approaching, and the situation in Russia and Ukraine continues, and so on.

Judging from the current situation, the market does have reasons for caution. The so-called old worries have not been solved and new ones have been added.The situation in Russia and Ukraine continues, inflation has not yet seen an inflection point, and the Fed's tough interest rate hike is the pressure that the market has been trying to digest recently.

The continuing disruption to the logistics supply chain and economic production activities seems to continue for some time, raising further concerns about global growth prospects, especially disturbances in key supply chains such as cars and parts, and electronic semiconductor supply chains.

At the same time, some leading companies reported lower-than-expected results, giving investors a reason to sell.

二、In essence, it is a question of who comes first at the inflationary and growth inflection point.

The inflationary inflection point has not yet been seen, but the growing concern about the growth inflection point is the underlying logic of investors' biggest concern about the market outlook.This means that monetary policy will still be maintained or even need to accelerate tightening to suppress valuations, while fundamental support is gradually loosening.

On the contrary, if the inflationary inflection point gradually emerges, it means that the Fed can continue to push for tightening in a relatively leisurely manner, while the earnings fundamentals are still resilient and can provide a period of transition and support, although the transition is difficult to be smooth.

Judging from the fundamental situation in the United States, the arrangement is relatively sound at present.. At the macro level, the newly disclosed supply contradictions such as the initial value of PMI manufacturing in April and the time of delivery have improved, which is significantly better than that in Europe. The repair of industrial output and durable goods orders in March also showed a gradual repair of production activity and supply in the wake of the outbreak.

At the same time, travel and consumption activities also increased significantly after the relief of the epidemic, which can be reflected in the sharp rise in the prices of related services in March inflation data. Profit levelThe recent disclosure of the first quarter results are mixed, especially the performance of some leading companies below expectations caused market concern, such as Netflix Inc, Google and so on. However, judging from the 30% results disclosed so far, 80% of the companies still exceeded expectations.

So you can seeUnder the benchmark situation, US fundamentals still have some underlying resilience, and the market is worried about whether the rapid tightening of the Federal Reserve and the impact of local outbreaks will accelerate the arrival of the inflection point of growth, which is the main logic of recent market concerns about trading growth.

However, the inflationary turning point has not been reached for a long time, making it impossible for the market to allay fears of further acceleration of tightening and price reversal.In fact, recently, CICC has noticed some signs of gradual easing of supply contradictions in the United States, such as the decline in delivery time in the PMI index, the rise in industrial and capacity utilization, the replenishment of channel and terminal inventory, the decline in used car prices, and so on.

But the surge in oil prices caused by the situation in Russia and Ukraine sharply offset the decline in core commodity prices in March, pushing up inflation to a new high, leading to recent hawkish statements by Fed officials and rising expectations of interest rate hikes (CME interest rate futures are now expected to count nearly 10 times in total 275np throughout the year, while 50bp expectations for interest rate increases in May are close to 100%).

From this point of view, it is not difficult to understand the evolution of the US stock market, plates and all kinds of assets under the recent emergence of some new variables.

三、Looking forward, based on the current situation, the "apparent" inflection point of CICC's tendency towards inflation is still likely to come first.This will not interrupt the Fed's pace of tightening, but it will ease some of the fears of exceeding expectations and accelerating tightening, especially given that there are already too many tightening expectations in asset prices. At this time, growth may still be some way from the real recession, thus providing a relative for the market.「friendly」The environment.

However, such a hypothesis based on the current situation does have variables, and more evidence is needed for the market. CICCIt is considered that the main verification point is5Near the beginning of the monthFocusing on the following changes:

1）Whether the Fed's May FOMC meeting exceeded expectations, considering that there are already many expectations in the futures market and asset prices (raising interest rates 50bp in May, raising interest rates 75bp in June, and raising interest rates again in July), if the information of this meeting does not further exceed expectations, it may be an expected realization for the market.

2）Whether the non-farm inflation announced in the United States in early May and the inflation announced in the second week can see an inflection point, oil prices will be significantly lower than in March when oil prices remain around 100 ("high inflation series 3: when oil prices remain high"). Used car prices are also expected to continue to cool and drag on core commodities, while the base will continue to rise, so it depends on the intensity of core services (travel and rent).

3）First quarter results and guidance in the United States.

CICC believes that there is a general possibility of cashing in in the benchmark cases mentioned above. If it can be cashed, it will help ease the current concerns and volatility of the market.In addition, short-term tightening expectations of US Treasury interest rates are a bit excessive, but it may also be difficult to effectively fall back before the policy falls and the inflationary inflection point occurs.

If it can be realized, CICC is expected to ease the pace for a while, and then gradually rise with the subsequent process of shrinking the table and raising interest rates, until the fundamentals are obviously under pressure. At the point, if interest rates are raised according to the 250bp for the whole year, it will probably correspond to 2.7% to 2.8% of the central bank; this round of central interest rate may be 2.9% to 3.2%, corresponding to the real interest rate of 0.3% to 0.4% and to inflation expectations of 2.5% to 2.8%.

Configuration recommendationsBefore the situation in Russia and Ukraine is effectively alleviated and China makes more than expected efforts and steady growth, CICC still recommends seeking benefits or protection from relative certainty.Maintain the logic in the April report of overseas asset allocation:

1) developed countries as a whole are still superior to emerging ones, and US stocks fluctuate more during the upsurge in interest rates.

2) the US dollar may remain strong, and some emerging market exchange rates, including China, may be under periodic pressure.

3) the upside-down interest rate spread between China and the United States is still likely to continue, and US bond interest rates may have a temporary respite after the landing of FOMC in May and the inflationary inflection point.

4) commodities as a whole are flat, and gold is shorter than longer.