Judging from the valuation, market sentiment, earnings, risk premium, policy variables, degree of adjustment and other indicators at the comparable bottom since 2005, this round of decline in April 2022 has reached the bottom range, but whether the subsequent market upside is reversed or rebounded is still divided.

We thinkThe biggest difference between reversal and rebound lies in sustainability. The expectation of profit improvement brought about by economic improvement in the future is an important signal to distinguish between reversal and rebound.. The process of market bottoming during the bottom consolidation period and credit week often corresponds to the process of stabilizing and rebounding economic data, and May and June are important times to confirm whether the credit cycle starts to rise. Before confirming the upward trend at the bottom of the credit cycleBetween the improvement of economic expectations and the confirmation of actual improvement, shock periods occur from time to time, and we believe that after the end of the rebound period, the current market is still at this stage.

In the past few rounds of bottoming, from the perspective of previous style changes, in addition to the gem and growth stocks that led the rise at the beginning of the rebound in 2013, the other bottoms were mainly led by large-cap stocks, gradually transitioning to small and medium-sized stocks. From the previous experience of the bottom industry, we can find that the sectors that rebounded in the bottoming period are often the oversold sectors in the previous period, butIn the follow-up, the industry is often led by the sector with the least fundamental logical resistance, rather than the sector with the biggest decline in the previous period.

Therefore, the recent rising plates may have released the rising potential to the maximum extent. In the selection of follow-up plates, we need to follow the logic of fundamental elasticity and capital selection.Varieties with more policy support and their own business cycle tend to have good excess returns.

Recently, there has been a differentiation in market sentiment, and the differentiation of the "strong and weak recovery" in the early game is more obvious, representing the policies of "strong recovery" supported automobiles, real estate post-cycle household appliances and liquor sector. the new energy and electronic sectors that represent the "weak recovery" and the dividend value plates that represent the "steady growth" superimposed with the expected logic of recession as a necessary condition for recovery are in a rotating state. At the same time, there is also differentiation within the plate, not all plates show a general rising pattern, and funds are always rotated in the subdivision of the plate.

Thus it can be seen that the current market still has not reached an agreement on the selection of the plate after the rebound, the characteristics of the stock game is still more obvious, funds can only choose to concentrate in one direction. The recent strength of Science and Technology Innovation Board is also the result of the lack of market liquidity. For the overall performance of the plate, the expectation of changes in capital flows can easily lead to changes in the style of the market.

In terms of profit forecasts, the economic and financial data that can be observed so far show that the recovery in the economy is still strong production and weak demand.At present, the policy framework system is still dominated by underpinning actions to stabilize employment. under this framework, the economic fundamentals in the second half of the year are likely to be dominated by a "weak recovery".

From the perspective of risk premiumShort-term decoupling of Chinese and American stock marketsThe difference in economic recovery between the two countries is an important point in raising the risk premium. The low probability of sentiment appeared at the end of April, and after a month or so of repair, there is a lack of a breakthrough to continue to rise, and outstanding fundamental recovery expectations and credit expansion expectations are still important factors in curbing the current market risk appetite.

With the gradual decline of macro volatility in the second half of the year, stabilizing the sector may no longer be the main target of market trading. If there are no further framework adjustments and changes in the second half of the year, the trading logic of A shares in the second half of the year may shift from macro top-down plate selection to bottom-up individual stock opportunities.

From the valuation point of view, after the adjustment of the track stocks with higher valuation in the early stage, after this round of market upward period, the sectors with more clear logic are still trading crowded, and the scope of capital movement is limited. In the case of weak expectations for the improvement of overall micro-liquidity in the market, the expected improvement in intra-plate liquidity may lead to the performance of more flexible sectors.

Considering the changes of macro and micro factors, the transactions before the performance redemption period may follow the direction of "smooth policy" and "smooth performance".In the short term, the logical interpretation may focus on the recent policy stimulus, adapt to the real estate post-cycle, the performance is likely to focus on the release of cars, spare parts, home appliances and other sectors to boost domestic demand, and the new and old infrastructure sectors that may once again exceed expectations in the second quarter.

In the second half of the year, the factors that can be determined are still concentrated in the long-term inflation chain and sectors where liquidity expectations are expected to improve.The logic of upstream resource products, oil, gas and agriculture is still unbroken..

Risk Tips:The prevention and control measures escalated again; the global inflation crisis; the overseas recession exceeded expectations; the economic recovery was less than expected; and the degree of policy introduction was lower than expected.