According to the Wisdom Finance APP, China International Capital Corporation released research reports stating that with the dust settling from the November US elections and Trump being re-elected, the Fed's interest rate meeting will proceed as expected with a 25bp rate cut. US stocks rebounded, overseas assets continue to exhibit cyclical characteristics; domestically, growth stabilization policies are intensifying. In October, multiple ministries held press conferences to announce a series of incremental policies. In November, the Standing Committee of the National People's Congress reviewed and approved large-scale local government debt plans. With policy support boosting sentiment, the market outlook is relatively positive, with a preference for growth and small-cap styles.

China International Capital Corporation's main views are as follows:

Overseas, since October, positive signs of recovery in US economic data have led to a gradual decline in market expectations for interest rate cuts.

Overseas markets are beginning to price in the possibility of a soft or non-soft landing for the US economy.

Since October, US economic data has been relatively strong, with the GDP reaching an annualized growth rate of 2.8% in the third quarter, core CPI in September surpassing expectations at 3.3% year-on-year, and unemployment rate holding at 4.1% from September to October. These conditions have gradually reduced market expectations for interest rate cuts, with the probability of the Federal Funds Rate dropping below 4% by June 2025 falling from near 100% on October 3 to around 50%. The strong fundamental data performance has led to an overall rise in US stocks. However, there has been significant volatility before the presidential election results were finalized, especially in the two weeks before the election, suppressing stock market performance. After Trump's victory was confirmed, the three major stock indexes rebounded collectively.

Overall, the cyclical style of the stock market is quite apparent, with the Dow Jones almost keeping pace with the Nasdaq, similar to the performance during the 1995 soft landing period. US bond rates have continued to steepen sharply, with short-term Treasury yields rising steeply above the one-year mark, while mid-to-long-term bond yields have been bear steepening. The 10-year US Treasury yield briefly climbed above 4.4% after Trump's victory.

Looking ahead, the bank believes that major overseas assets may continue to exhibit cyclical and inflationary characteristics in the next month.

In the US stock market, with the cautious progress of the Fed rate cut, the continuous repair of fundamentals will boost corporate profits, and there is high allocation value in consumer sectors related to demand resilience, downstream sectors of the real estate chain (hardware, plumbing, furniture, etc.), as well as capital goods sectors related to the stabilization of the manufacturing industry and raw material sectors. Under the potential pressure of Trump's additional tariffs, related domestic export industries may face a boom driven by export grabbing. The steepening pressure on the US bond interest rate curve may depend mainly on the inflation and unemployment rate data in the coming months to see if the 10-year US bond interest rate can break through the 4.5% resistance level. Commodity prices may still face some suppression in the short term.

The price of copper is affected by Trump's tariff increases disrupting the global economy, and its future prospects will mainly depend on whether the Chinese economy can stabilize. Regarding gold, adjustments are seen in terms of valuation and trading under the triple pressures of uncertainty fading in the election, Trump's re-election driving up the dollar, and sustained high real interest rates. However, the bank believes that factors supporting the upward trend in gold prices such as inflation and major fiscal policies remain unchanged, leading to a relatively optimistic outlook.

While overseas fundamentals are optimistic, the bank also points out the potential pressure on US dollar liquidity.

Since April this year, the scale of reserves (narrow sense liquidity) has been trending downward, reaching the level of 'Ample Reserve,' as mentioned by Fed Governor Waller at the beginning of this year, which is about 10%-11% of nominal GDP. Historically, once reserves fall below this level, it often leads to financial risks. As of now, the Fed has not expressed its opinion on when to end balance sheet reduction. If the Fed continues to maintain the monthly limit of $60 billion for balance sheet reduction (actual average from June to October was $44 billion), the scale of reserves may break the lower limit of 'Ample Reserve,' reaching 10%, no later than the second quarter of next year, affecting financial market stability.

In the domestic market, positive market sentiment and active capital drive small caps and growth styles to continue to rise.

In the domestic market, current market trading is mainly influenced by funds and sentiment, with small caps and growth styles having the advantage.

Since October, various ministries including the NDRC, Ministry of Finance, Ministry of Housing and Urban-Rural Development have successively held press conferences, introducing a series of stability-oriented economic policies. In November, the NPC Standing Committee introduced a debt-to-equity plan to consolidate market confidence. After a rapid rise at the end of September, the market gradually stabilized in October with some internal differentiation. Positive market sentiment and active capital drove small caps and growth styles to continue rising, while large caps represented by the csi 300 index and the previously well-performing dividend styles experienced a slight pullback.

In terms of funds, since the peak of capital inflows into the stock market at the beginning of October, there has been some decline, showing a high-then-low trend, but overall remaining net inflows, with active margin buying in both markets.

Firstly, the stock ETF had a net inflow of nearly 40 billion yuan in October, with a net inflow of 150 billion yuan in the first week of October, followed by a slight decrease, but the outflow rate has slowed down since late October. The net financing balance of ETF increased by 8.2 billion yuan in October, with a net increase of 13.4 billion yuan on October 8th, followed by a slight decrease, and the net financing amount has been decreasing at a slower pace since late October.

The proportion of financing buy-in amount rose rapidly and remained at a high level, with an increase of nearly 2 percentage points compared to the period before policy announcement (July and August). At the same time, industries with high net financing buy-in amounts such as finance, defense military industry, electronics, and computers also performed well. Lastly, foreign capital had an overall net inflow of 24.1 billion US dollars in October, with passive funds having a net inflow of 25 billion US dollars and active funds having a net outflow of 0.9 billion US dollars. There was a net inflow of 39.4 billion US dollars in the first week of October, followed by minor outflows in the next three weeks. Foreign capital mainly flowed into the technology, medical care, and consumer sectors, with a significant outflow from the financial sector.

In terms of market sentiment, the market sentiment indicator remained at a high level in October.

According to the relevant media reports, the bank examined the A-share market sentiment based on three indicators: turnover ratio, ETF premium, and dividend premium. Firstly, the A-share trading volume and turnover rate in October were higher than previous levels. The average daily trading volume of A shares in October was about 2 trillion yuan, higher than the level of approximately 600 billion yuan before the policy announcement, with the trading volume on October 8th reaching a historical high of nearly 3.5 trillion yuan. There was a subsequent slight decrease but the overall level remained high. The A-share turnover rate also significantly increased from the previous 2% to 5%.

The higher turnover rates in September and October overall supported the performance of A shares. The high turnover rates of the Bei 50, CSI 1000, and CSI 2000 supported the index performance. Additionally, in October, the stock ETF's weighted premium rate slightly turned positive, showing a slight premium compared to the over 1% premium rate at the beginning of October, indicating an improvement in market sentiment. Lastly, the dividend premium remained at a high level in October. The dividend premium is the difference between the price-to-book ratio (PB) of all A shares and dividend stocks.

Dividend stocks are generally considered defensive, performing well when market sentiment is weak, causing the PB value to rise, leading to a premium compared to the overall stock market; conversely, when market sentiment improves, the dividend premium decreases. Since mid-October, the A-share dividend premium has been steadily decreasing, pushing up the overall performance of A shares due to improving market sentiment. Furthermore, research shows that the performance of small-cap stocks and less profitable growth stocks can also be used to gauge market sentiment. The strong performance of small caps such as the Bei 50, CSI 1000, and CSI 2000 is a strong indicator of improved market sentiment.

Improvement in market sentiment and the return of funds are major drivers of the market, with market sentiment improvement being stronger than fund flows. Currently, monetary and fiscal policies are working together, and future policies are expected to further enhance market sentiment and shift the market from being driven by sentiment and funds to being driven by fundamentals.

In terms of monetary policy, in October, various monetary support policies were implemented, including securities, funds, insurance companies' interbank facilitated transactions (SFISF), repurchase and re-lending, and repo agreements. The central bank's third-quarter monetary policy execution report stated its commitment to a supportive monetary policy, increasing counter-cyclical adjustment efforts, with promoting reasonable price increases as a key consideration for monetary policy. Additionally, the US Federal Reserve is expected to further reduce interest rates by 25 basis points at the November meeting, creating a favorable environment for maintaining loose monetary policy in the future.

In terms of fiscal policy, on November 8, the Standing Committee of the National People's Congress reviewed and approved a large-scale local debt plan. The one-time increase in hidden debt replacement quota alleviated the burden of local debt, saved interest expenses, and released incremental fiscal space. At the same time, next year, the intensity of growth stabilization policies is expected to increase. In addition to supporting the development of the real estate market through tax and land storage policies, it also includes actively utilizing the available deficit space, expanding the scale of special bond issuance, continuing to issue super long-term special national bonds to support both "two redundants" and intensifying support for "two news," helping to boost investment and consumption. In the second half of the financial cycle, against the backdrop of prominent demand insufficiency contradictions, the importance and necessity of fiscal expansion to boost economic growth and alleviate financial risks are more significant.Combined with the reinforcement of fiscal policy efforts after confirming the policy bottom, it will help improve market expectations further and form the future economic bottom, transforming short-term market trends driven by market sentiment and liquidity into medium- to long-term trends driven by fundamental factors.

From the perspective of historical interest rate cuts and literature research, the depth of interest rate cuts in the United States and the speed of economic rebound are affected by the pre-interest rate economic conditions.

In particular, relatively healthy household balance sheets and real estate markets often correspond to faster rebounds. Before this round of interest rate cuts, key factors such as high cash ratios, low debt leverage ratios, low real estate vacancy rates, and being in the first half of the financial real estate cycle accelerate the pace of this round of economic rebound. Based on the quantitative analysis of samples of all 17 interest rate-cut cycles in the United States since 1965, the bank estimates that the U.S. economy is expected to rebound 4-5 months after this round of interest rate cuts, that is, the first to second quarter of next year may be the time window for the cyclical rebound.

In fact, under the dual stimulus of interest rate cuts and fiscal concessions, the intrinsic growth resilience of the United States has already been realized. Consumption, equipment investment have bottomed out and rebounded, positive signals have also emerged in the labor market, and the possibility of the economy not landing is rising. In terms of asset allocation, continue to be bullish on pro-cyclical and inflation-friendly styles, and switch liquidity-driven assets to caution. Fundamental repairs will continue to drive pro-cyclical sectors such as discretionary consumption, capital goods, and raw materials to sparkle, and be beneficial to related export sectors domestically before the realization of Trump's tariffs. However, the continued balance sheet contraction may also lead to a tightening of US dollar liquidity.