The price index continued to fall into negative territory, and house prices were also in **;How can the general public cope with the current difficulties and challenges?We will continue to follow the principle of full allocation and implement diversified allocation of assets.
Since 2023, the price index has continued to decline into negative territory. According to the latest data from the National Bureau of Statistics, the increase in CPI of household consumption continued to decline to negative numbers, and the year-on-year increase in the latest industrial producer index PPI has been running in the negative range for a long time.
As for housing prices, I personally measured that the actual transaction price of second-hand houses in the core area of Shanghai has dropped by 20-30% compared with a year agoA large number of real estate companies are in trouble, and it is not ......uncommon for society to default on various debtsSo, as ordinary investors, how do we deal with the difficulties and challenges we are currently facing?
First, domestic asset allocation, lying flat in the right posture
We all know that from an investment perspective, encountering a "crisis" is almost equivalent to encountering an "opportunity", depending on how to grasp it.
Whether it is from the 33-year-old Shanghai Composite Index or the 18-year-old CSI 300 Index, despite the recurrence, the overall trend is upward, representing our national fortune. It is also easy to understand that after three years, the first has been at a low level, according to the principle of "things must be reversed", the probability of an upward rebound next year is very large.
In other words, despite the negative information we perceive from economic fundamentals, investors often ignore the most important piece of good news, which is "cheap enough". Almost all the negative factors are reflected in the **. In the future, no matter how bad the performance of the capital market is, it will not be bad.
The chart below shows that the price-to-earnings ratio of the CSI 300 Index, which represents the core companies of the domestic ** market, is less than 12 times at the end of 2023, which is near the historical low, which is significantly lower than the historical average.
No matter how long the slowdown in economic growth may be, as the world's largest consumer market, our fundamentals of 1.4 billion people remain strong. The leading companies in these industries still have room for growth in operating profits, while the leading companies in the high-end manufacturing industry are also doing well, and the health care industry, which is the beneficiary of an aging population, has a broader prospect.
There are so many academic theories mentioned earlier, and the author hopes to be down-to-earth, that is: men's face, women's appearance, children's wisdom, and the health and ...... of the elderlyare the places where the corresponding people are most willing to spend money. As a result, the corresponding high-end liquor, medical beauty makeup, education improvement, health care and other industry leaders must be good business.
Investment is to buy a listed company, and a good company is cheaper, which is a good investment. If we invest in a basket of listed companies, within a few years, we can recover the investment cost by relying on the company's dividends. Then, even if economic growth slows down or even recessions, we can still get a reasonable return on investment.
Based on the above analysis, I believe that the domestic first-class asset allocation strategy in 2024 I think should be fully matched, that is, "lie flat in the right posture".
Is it the same for property market investment?
It is true that the level of domestic housing prices is still very high, the affordability of the people is overloaded, the macroeconomic growth rate continues to slow down, and the outlook for residents' income is hardly optimistic......These are plain facts. In addition, new phenomena such as the loss of population growth and the continuous aging of society have led to a reversal of the relationship between supply and demand for housing.
However, as house prices have fallen, they have returned to affordable levels. It should be a good thing for people who just need to live and improve themselves. In my opinion, for people who just need real estate, the allocation of real estate should adhere to the principle of "buy if you can", only buy affordable houses, and never affect the quality of life due to excessive debt due to buying a house.
For those who invest in real estate, the price of commercial and residential buildings in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen is at least half lower than the unit price of pure residential buildings of the same location and quality, and the commercial and residential buildings are generally newer, and the rental yield is higher than the current mortgage interest rate. As a result, it is more resilient to future market uncertainties. It can be used as an alternative to ordinary housing in domestic asset allocation and become an integral part of real estate investment.
Of course, in the current economic downturn, employment difficulties and declining incomes are no longer just legends, so low-risk asset allocation such as cash and government bonds is essential. Only sufficient food reserves will allow us to lie down peacefully for the winter.
In addition, the global allocation can help us grasp the investment opportunities brought by the growth of other overseas economies, but from the domestic view, the overseas market seems to be full of turbulent waves
2. Overseas asset allocation, "one whale falls and all things are born".
In fact, in the past year, despite various geopolitical issues such as the continuation of the Russia-Ukraine conflict and the resurgence of the Palestinian-Israeli conflict, there has been a rumor of an imminent economic collapse in Europe and the United States in the domestic circle of friends. However, investors who allocate overseas assets on the principle of "matching as much as possible" have achieved good returns in the past year. Among them, the risk-free return of U.S. short-term Treasury bonds has reached an annualized rate of more than 5%, and the return rate of U.S. stocks has reached a very high double-digit rate.
The fundamental reason for the good returns on overseas asset allocation is that inflation in major economies such as Europe and the United States has been brought under control, while the unemployment rate is still at a historically low level. Therefore, the market generally expects that the interest rate hike has come to an end and the economy can achieve a "soft landing".
In the chart below, it is clear that the Fed's pace of interest rate hikes has slowed significantly compared to 2022 and has tended to stop.
In fact, moderate inflation coupled with normalized interest rates is not a bad thing for the economy. The current days when inflation is back below 5% and interest rates are at 5% is something I experienced 20 years ago when I was working in Canada, as long as I get used to it.
Moreover, for retirees who live on "property" income subsidies, they now have an annualized return of more than 5% without taking risks in the bank. If you are willing to save for the long term, you can double your assets in 10 years. It is also a fair social environment for the propertied people.
In 2023, I have traveled to the United States, Canada and several European countries, and the actual observation is also the conclusion that the economy is running smoothly. Walking through the streets of cities in the United States and Canada, you can see many job advertisements for ordinary workers, who do not need professional skills, and can go to work as soon as they want, with a minimum wage of about $15 per hour. In some places, even McDonald's has to pay more than $20 an hour for junior employees. In fact, as long as people are willing to work, they can go to work at any time to maintain a normal life. Europe is not in the same decline as many people in the country remember. On the contrary, a number of European economic powers often retain strong industrial manufacturing capacity while having political, financial, tourism, and other advantages, so that economic growth is slow and steady, social harmony and order, and life is high-quality and good.
On December 22, 2023, the U.S. Department of Commerce released the U.S. Personal Consumption Expenditures (PCE)** index for November, showing a year-on-year increase of 32%, the smallest increase since April 2021, and the increase is also slightly lower than October. Further reinforcing expectations that the Fed's interest rate hikes have come to an end, the dollar's unilateral strength has reversed. Historical experience tells us that when the dollar weakens, mainstream asset classes such as global ** and bonds will perform better. This is the scene of "one whale falls, and all things are born" in the international market. In 2024, there is a high probability that such a scene will continue.
All in all, in the face of all the uncertainties that still exist in 2024, and even the stormy waves that may be encountered, we should still follow the principle of matching with a calm mind, and implement diversified allocation of assets, so as to ultimately achieve the "small goal" of asset preservation and appreciation.