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市场正“卖出首次降息”?美银:下半年看好防御性股票、黄金、债券

Is the market 'selling the first interest rate cut'? Bank of America: Bullish on defensive stocks, gold, and bonds in the second half of the year.

wallstreetcn ·  Sep 8 10:33

Hartnett believes that the probability of a "hard landing" in the United States is generally underestimated, even if the Federal Reserve only lowers interest rates by 25 basis points for the first time, it will still significantly lower interest rates. He believes that the most advantageous course of action now is to "sell the first interest rate cut" and wait for a better opportunity to enter the market for risk assets.

The number of new jobs added in the non-farm sector in the United States in August was far below expectations, and the previous value was also significantly revised downward. However, the unemployment rate decreased slightly and wages accelerated. The labor market has released complex signals, and the Fed's interest rate cut in September is still undecided. At present, the probability of a 25 basis point and 50 basis point interest rate cut is basically half and half.

With increasing uncertainties in the labor market and continuous slowdown in inflation, what consequences will this bring to the US economy and financial markets in the short and medium term?

Bank of America's chief investment strategist Michael Hartnett mentioned his five observations in the Flow Show report released this Friday:

  • The probability of a hard landing is generally underestimated. According to the latest Bank of America Global Fund Manager Survey, the probability of a hard landing in the United States is 13%, while the probability of a soft landing is 76%.

  • The market is 'selling the first interest rate cut', and risk assets have been actively leading the Fed and are no longer concerned about lower growth.

  • Call 3B bonds, gold bars, market breadth (through stocks 'defensive'): these are 'buy on dips' strategies for the second half of the year;

  • Cyclical home builders, banks, and semiconductor companies are most likely to be affected by the 'hard landing' in the United States; commodities, emerging markets, especially China, are least likely to be affected;

  • In the global market, the real estate and banking sectors in the United Kingdom, Canada, Australia, New Zealand, and Sweden have the best opportunities. In all floating mortgage rate markets, the rate transmission mechanism of these sectors has a much faster impact on people's emotions than the United States.

However, Harnett also acknowledges that although the data still indicates that the economic soft landing still faces challenges, it is not all pessimism. Specifically, the following:

Steepening yield curve: Usually occurs before or during an economic recession.

The leading indicator inventory-to-sales ratio indicates that the ISM index will remain below 50 for the rest of the year, and defensive stocks are pricing in an ISM <50, while bonds and stocks are not pricing it in.

The ISM index is correlated with employment figures over the past seventy years, indicating that the phenomenon of significant job losses has not yet occurred. The index also explains the reasons for the accelerated weakness in labor data (JOLTS, ADP, significant downward revision of non-farm payrolls in July).

In addition, in the real estate market, mortgage applications for home purchases are still at a low level, indicating that interest rate cuts have not had a significant boost on the real estate market in the short term.

In summary, Hartnett believes that although the Federal Reserve is likely to only lower rates by 25 basis points during the first rate cut, it will still cut rates significantly afterwards. He believes that the most advantageous strategy now is to "sell the first rate cut" and wait for a better opportunity to enter the market for risk assets.

The reasons are as follows:

  • Fiscal stimulus measures reversed: US government spending in the past 12 months decreased by 6% compared to the same period last year.

  • Currently, the real basic interest rate in the United States is 6.5%, which is the highest level of this century, especially unfavorable to the small business sector in the United States.

Last but not least, if the number of employed people is even fewer than now, Hartnett will be even more pessimistic.

Before the release of the non-farm payroll report on Friday, Hartnett predicts:

If the number of new non-farm jobs added in August is less than 0.1 million and the unemployment rate is greater than 4.4%, it indicates that the US economy is experiencing a "hard landing", then the Fed will cut interest rates by 50 basis points in September, and it is predicted that the 10-year US Treasury bond yield will approach 3%.

The perfect data is that the number of new non-farm jobs is between 0.15-0.175 million, and the average hourly wage increase is less than 0.1% compared to the previous month, indicating that the US economy will experience a "soft landing", and the technology and energy sectors will lead the market reversal.

In reality, the number of employed people increased by 0.142 million, the unemployment rate decreased by 0.1 percentage point, and the average hourly wage accelerated both on a month-on-month and year-on-year basis. Although the situation is not as bad as Hartnett predicted, it is enough to impact the stock market because the market's expectation of a 50-basis-point rate cut by the Fed quickly diminished.

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