This article is edited from Ping an Securities-Chief Economic Review: my opinion on re-inflation Trading. Warburg Securities-Macro Strategy Research report: the Game between upward performance and downward valuation.

A game of downward valuation and upward profit

The traditional view is that U. S. bond yields rise too fast will kill valuations, especially the U. S. growth stocks, already overvalued, when the impact will be greater.

ButTrue causalityIt could be like this.At the same time, A leads to both B and C, where An is the repair of the US economy, causing B's US bond yields to rise, while causing C to grow more strongly on US corporate profits.

Under the circumstances,The upward rise in US bond yields will lead to a correction in US stock valuations, but because US companies are more profitable, US stocks will have more solid support.

The Federal Reserve has repeatedly stated its position recently.There is no solid evidence of asset price bubblesIt may be related to this causal relationship.Because the Federal Reserve sees that the profit growth of American companies is relatively solid.

(orange Line: Bloomberg consensus Forecast S & P EPS Yellow Line: Bloomberg consensus Forecast PE)

Some foreign institutional investors have made statistics.

If the 10-year Treasury yield is below 3 per cent (although it is still a long way from 3 per cent) and during the upward phase of interest rates, then in most cases, US stocks will outperform US Treasuries. The logic behind it is simple, because the economy is going up and corporate profits are growing well.

If 10-year Treasury yields are above 3% and interest rates are falling, U. S. stocks will outperform Treasuries most of the time. The logic behind it is also simple: monetary easing, when there is an inflection point in money, stocks may react more quickly than bond markets.

At present, the 10-year Treasury yield (1.57%) is still a long way from 3% and is still in an upward process. Therefore, from the perspective of historical statistics, in most cases, US stocks are still stronger than US Treasuries.

One indicator worth paying attention to isExcess CAPE Yield(that is, the reciprocal of inflation-adjusted CAPE, minus the inflation-adjusted 10-year Treasury yield.) according to this indicator, US stocks still have an excess return of about 2 per cent relative to US Treasuries, which is still in theShares are better than debts.The state of.

Short-term allocation is pro-cyclical, long-term core assets are still the first choice.

At present, the stock market will show a structural market because of the "upward economic prosperity + upward expectation of risk-free rate of return".The driver of valuation gives way to profit-drivenMore opportunities for the market will come fromAlpha's opportunity requires careful cultivation and looking for stocks with high prosperity attributes and competitive barriers in the subdivided track..

There is a need to focus on the impact of the shift in global liquidity on overall valuations.Sectors that rely on long-term discount logic pricing face greater pressure on valuation adjustment, including leading stocks in industries such as consumption and biomedicine, as well as growth stocks that have not yet been adjusted or underadjusted..

Focus on the sectors:

• Benefit fromSectors with upward risk-free returns: insurance, banks, etc.

• Global recovery Resonance + PPI Uplink:Materials and equipment in the middle and upper reaches of growth chains such as chemical industry, non-ferrous metals, construction machinery, household appliances, new energy vehicles and semiconductors

• Service-oriented consumption gradually recovered from the epidemic:Film and television, catering tourism, medical beautyAnd so on.

• AttentionCore assets such as science and technology, consumption, biomedicine and new energyAllocation opportunities after valuation digestion: in accordance withThe development direction of current and future economic structureThere is a long-term bull logic, short-term valuation is more expensive.However, as the performance digests the valuation or takes the initiative to adjust the valuation, it is stillThe most worthwhile plate to configure.