How Long Will The Three Big Profits Of American Stocks Reappear?

Since bottoming out in late March, the three major indexes of the US stock market have risen sharply, recovering the lost territory under the support of the Fed's liquidity banquet and optimistic expectations of economic restart. Despite Wall Street's constant hints of risks and a "divergence" between the market and the economy, it is still difficult to stop investors from rising enthusiasm.

Until June 11th, "black Thursday", the adjustment finally came. The US stock index fell sharply on the same day, the Dow Jones Industrial Average fell 1861 points, or 6.9%, and the S & P 500 and Nasdaq index dropped by more than 5%. Three US stocks have suffered the worst since 3 months. The panic index VIX, which measures market volatility, has risen by nearly 50%.

The sell-off is most serious in areas related to economic restart, such as aviation, energy, finance and other sectors. Even the main technology stocks that rebound this year are no exception. The US technology giant has plunged collectively, Microsoft and Facebook have fallen by more than 5%, Apple has fallen by 4.8%, Google's parent company Alphabet has fallen 4.29%, Amazon has dropped 3.38%, and nfei has fallen by more than 2%.

After the sharp fall in June 11th, the three major stock indexes of the US stock market collectively opened on June 12, and rose by more than 2% as of the deadline.

In June 11th, traders left the New York stock exchange. The three major indexes of New York stock market fell more than 5% on the 11 day. Xinhua News Agency

Three reasons behind the collapse

Although the magnitude of the callback is still small compared with the increase in US stocks since late March, it highlights the fragility of the underlying market rebound in the context of the great recession.

Combing reporters found that Wall Street people generally blame the three major reasons for the collapse. First, the Fed released a dovish argument at a recent conference on interest rates, giving the market a relatively pessimistic economic outlook; two, a rebound in the number of cases in the United States after unsealing, exacerbating the two outbreaks of the new crown disease; and three, the optimism of the market has gone to extremes, and the pressure of gaining profits has been immense. For many people, it is not an unexpected thing to fall back.

Brian Price, head of investment in the federal financial network, said that the June 11th sell-off did not appear to be a response to specific information. "In my view, the rally since the low point in mid March has been a bit excessive, so it is not surprising that the adjustment is taking place. We have been hearing that retail investors are increasingly speculating on high-risk stocks and markets, and this enthusiasm may sometimes be a negative indicator.

Yang Delong, chief economist of Qianhai open source fund, believes that the direct cause of the US stock crash is that the United States is worried about the two outbreak of the outbreak in early resumption and resumption of production in the United States, thereby cracking down on the consumer service industry. The fundamental reason is that the US stock market has gone up. "The bull market driven by water is extremely unstable. Once a fund is sold, it will trigger a chain reaction and a sharp rise and fall." Yang Delong said.

Standard Chartered Bank's wealth management department believes that the risk of another large-scale outbreak of the outbreak is increasing, and that the market needs temporary stoppage after gaining a substantial increase in the previous period, which is the most likely factor to trigger a market crash.

The day before "black Thursday", the Fed just released the "Dove" signal, announcing that the interest rate remained at a level close to zero, and is expected to remain at the end of 2022. At the same time, it said that the pace of asset purchases would remain at the lowest level.

In terms of economic forecasts, the Fed expects the US GDP to shrink by 6.5% in 2020 and rebounded to 5% in 2021. The unemployment rate is expected to be 9.3% in 2020 and 6.5% in 2021. But when it comes to employment, Powell, the chairman of the Federal Reserve, says that millions of Americans will not be able to return to their old jobs in the future, and that the US labour market will probably return to normal after several years.

The economic argument was interpreted as "pessimistic" by the market, and it quickly triggered the dissatisfaction of President Trump. In June 11th, Trump fired again at the Federal Reserve on the social platform, saying that the Fed often made mistakes. "I have also seen data and are much better than them." Trump said, "we will have a good three quarter, a great four quarter, and 2021 will be one of the best years of history."

Institutional differences in market outlook

"We have been emphasizing that the risk of market withdrawal is increasing. The process of economic recovery is unlikely to be smooth and investors are increasingly confident of bright market prospects. Our biggest worry is still the two outbreak of the outbreak. Although we feel that the possibility of a further blockade is not too great, and even so, the scale is absolutely incomparable to the first round of the epidemic, but the epidemic's changes in people's behavior and the impact on the mood may disrupt the pace of economic recovery. " Standard Chartered Bank wealth management department believes.

But with a combination of factors, the Standard Chartered Bank's wealth management department believes that the US economy has passed the worst period, benefiting from both monetary and fiscal stimulus. This will support the performance of the stock market in the future. In strategy, prudent strategies should be adopted, such as "prudent grouping in order to share costs", which may better manage current market exposure.

Citigroup's wealth management perspective is more optimistic. The agency believes there are more and more signs that the economy is gradually recovering, and US Treasury Secretary Mnuchin's statement also shows that the US economy may not return to a completely stagnant state. Therefore, in this market pullback, Citigroup believes that the partial adjustment of market overbought situation in the past few days is not a turning point in the economic or policy stance, and the market callbacks or create opportunities for bargain placement. "The US stock market went up sharply in the early days, and the market profit taking came sooner or later. The only way to effectively control risks is to decentralize asset allocation. From the perspective of asset allocation, as the market bottomed out from the market, the US small cap stocks are lagging behind the large cap stocks, and there will be future inflation opportunities. "

The overseas strategy of CICC pointed out that in the first half of the year, after the "roller coaster" ups and downs, the US stock market was in a "Trident intersection". It was a continuous effort to recover the lost territory under the impetus of the epidemic situation and the resumption of work progress, or was it once again callback due to the recurrence of the epidemic and the rise of the political risk, or was it repeatedly seen in a stalemate? The market is facing two positive and negative factors: the positive side is continuity of policy support and ample liquidity; the gradual recovery of the fundamentals under the promotion of re employment; the institutional location is not high; the negative side is that the valuation is too high, the US election is approaching, and the international environment is facing variables.

From the perspective of historical experience, CICC's overseas strategy believes that no matter whether the reasons behind the market crash are adequate or valid, in general, once such a large fluctuation occurs, it may be necessary to digest relatively well, whether it is from the management of damaged investors' positions or intends to increase the wait-and-see of investors unless the policy intervenes in time. Therefore, in the future, the market may once again enter a state of twists and turns. "But in the medium term, whether we are going to make a trend reversal or a two dip judgment may yet remain to be seen. After all, despite the twists and turns in the resumption of work, the large-scale policy support is still going on since the outbreak, which is also the most critical factor to support the bottom of the market."

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