Today is the first day of the new year. I wish you all the best wishes and smooth investment in the new year!
There is one of the most basic facts in investment, that is, asset allocation determines more than 90% of investment returns. In other words, the asset class we buy is the core factor for our investment. Let’s talk briefly today about the logic behind the two most promising assets in 23 years.
22 years bearish on risk assets
The performance of risky assets has been poor for the entire year of 22, from non-US currencies, to commodities, global stock markets, and bonds. The global economy in 22 years is a typical stagflation. In this environment, currency is the best asset class from the perspective of asset rotation, and from the perspective of asset income, it is true that holding cash should outperform many assets. Only China’s national debt and the US dollar performed relatively well. At the beginning of the fourth quarter of almost 21 years, it has been reminding the risks of various assets, and the defense in advance in 22 years should be foreseeable.
23 years, long A shares and U.S. bonds
The Shanghai and Shenzhen 300 have fallen for two consecutive years, while the U.S. ultra-long-term treasury bonds have fallen by 32% this year. The mismatch between the Sino-US economy and monetary policy will continue in 23 years, but as long as we get rid of the stagflation environment, this is not the core issue. The core logic has changed in the past 23 years. The Chinese economy has gradually entered a recovery cycle, while the U.S. economy has entered a recession cycle. This has determined that the gradual rotation of assets has begun. Do more A-shares on dips and U.S. bonds on dips will be the best choice.
The core challenge comes from the 5% USD fixed deposit income
This does not mean that there will be no challenges to the economy or the capital market next year. On the contrary, the recession of the global economy and various liquidity crises that may be triggered by the end of the Fed’s interest rate hike may continue to interfere with the market. The expectation of reduced cash flow will put continuous pressure on overseas stock markets, and overseas disturbances will be one of the core sources of A-share fluctuations in 23 years.
According to the current rate hike rate of the Federal Reserve, there is a high probability that the benchmark interest rate will be raised to 5-5.25% in the first half of next year, which is already a very high level, which means that the return rate of many US bond assets will reach More than 7%, or even higher. Just imagine that in this environment, if interest rates are kept high for a period of time, how much money is willing to enter the stock market in the short term? What assets can return with certainty higher than 5% risk-free return? From the perspective of the price comparison effect of assets, perhaps the S&P 500 will fall out of the return expectation that is higher than the deterministic return rate of 5% risk-free return rate, and then more funds may be allocated to the stock market.
A shares
There is no major systemic risk, mainly because the domestic economy has reached the bottom, and domestic liquidity is not bad, but violent fluctuations may be unavoidable. On the one hand, it comes from overseas, and on the other hand, the economic recovery may not be as expected It’s so good, especially the real estate pressure. This means that if you want to configure an index, such as the Shanghai and Shenzhen 300, you must buy it on a dip, especially in the first half of the year, when there are still many risk events.
U.S. Treasuries VS Precious Metals
The decline in U.S. bond yields is also gradually predictable. The economic recession and the fall in inflation will be relatively certain events. However, since it is difficult for most domestic investors to participate in it, it is highly related to the U.S. bond yield. Precious metals, especially silver, would be good alternative assets. Regardless of whether the Fed lowers interest rates in the second half of 2023, the market will reflect liquidity expectations in advance. Like A shares, the rhythm still needs special attention, and don’t chase the rise, especially in the first half of the year.
@ @今日话题$Shandong Gold(SH600547)$ $China Construction(SH601668)$ $Wen’s Shares(SZ300498)$
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