Global: it is too early to discuss TAPER, US stocks are still in the slow bull

Despite the voices of Taper, landing boots is not easy: on the one hand, US short-term GDP,CPI, consumption, house prices and other data continue to rise, on the other hand, the decline in real hourly wages, slow job recovery, too high share of household wealth, and the negative impact of tax increases by the Biden government on corporate investment and recruitment need to be fully considered by the Federal Reserve.

Therefore, we do not think that Taper will be achieved overnight, and the initial judgment will be that Q4 / 2022 will have a clearer signal. Us bond yields rose too fast at the beginning of the year, fully digesting the impact of inflation, although we judge that yields are still volatile upward, but we believe that 1.9-2.0% is the threshold for US stocks to turn.

Based on 2022 earnings, below 4500 points (our target for this bull market in US stocks), S & P is still running within the valuation framework of the past decade and is not significantly overvalued.

Domestic: the market around the second quarterly report has begun.

The upward trend of medium-and long-term corporate loans proves that the economic cycle is still expanding. We initially judge that output (industrial value added compared with the same period last year) and M1 will begin to rebound in June and July.

Starting in June, CPI and PPI will converge, meaning manufacturing profits will improve. With the gradual upward trend of CPI, the confidence of the market will continue to be improved.

Taking the past decade as a reference, the current valuation of A shares is not high, and the valuation of most broad-based indices (2022) is only the average. Therefore, we believe that in the period of expansion of the economic cycle, the market is expected to break through this round of new highs, with a target of 4200-4300 points in the second half of the year.

From the perspective of growth, scientific innovation and cycle are dominant; from the mid-report performance, the cycle is better; from the valuation point of view, big finance has more new gravity.

Investment advice on Hong Kong stocks: it has been gaining momentum for a long time to challenge new highs

We adjust the target range of 31000-32,000 points for the Hang Seng Index in 2021, which means that the Hang Seng Index has a chance to challenge this round of new highs.

We believe that while the market goes up in the second half of the year, it will also be accompanied by rotation. The better half-yearly report or other fundamentals-driven sectors are mainly textile and clothing, medicine, metals, and energy. Secondly, Hang Seng Technology and Big Finance are expected to meet expectations and share prices are overfalling, there will also be obvious valuation repair.

After the second quarterly report or Q4, the valuations of some sectors are too high, coupled with the uncertainty of taper and capital at the end of the year, making it impossible for risk appetite to continue to rise, when focusing on resource stocks whose prices may continue to rise, bank stocks with low valuations, gaming stocks with lagging recovery expectations, as well as telecom operators and Hong Kong local stocks with less impact on the economic cycle.

Risk hint

The lower-than-expected risk of macroeconomic recovery, the risk of repeated outbreaks, the uncertainty of Sino-US trade relations, and the risk of science and technology war.