2023 has passed, leaving a lot of memories. And starting in 2024, we also have a lot to look forward to. We summarize the many changes in the economy in 2023 and grasp the context of the market in 2024. From an economic point of view, it is actually a process of replacing the engine nowadays, and new growth points are brewing, which takes time; At the same time, the Fed's interest rate cut in 2024 is the biggest positive, making the capital more easing, which is also conducive to the recovery of the financial market. Therefore, we need to see the problems that the market needs to solve, and it also takes more patience and time.
The economy is recovering, and it will take time to adjust the structure
In 2023, almost all institutions are expecting a strong economic recovery, and the actual results show that the recovery is there, and China's GDP (gross domestic product) is currently expected to grow by 5 in 2023about 3%, especially the two-year average growth rate is 4About 1%, showing a weak recovery overall. In recent years, the relationship between supply and demand in the real estate market has undergone major changes, and despite the introduction of policies, the market is expected to be difficult to reverse in the short term. Weakening international demand also has an impact on the export economy. One of the most critical factors is that in 2019, the economic restructuring has already appeared, but in the subsequent epidemic cycle, people will think that the epidemic has caused the economy to weaken, but in fact it is a structural transformation factor.
From this, let's look at the economic data for 2023. First of all, we can find the obvious changes that have taken place in our economy. The contribution of consumption to economic growth has risen sharply; At the same time, the contribution rate of net exports to economic growth has turned from positive to negative, and the contribution rate of capital formation to economic growth has decreased significantly. This is a process of structural adjustment. According to data from the Ministry of Finance, from January to October, the national budget revenue was 4,379.5 billion yuan, a year-on-year decrease of 16%. In terms of local and local revenues, the budget revenue was 341.7 billion yuan, down 5 percent year-on-year8%；The revenue of the local budget at the same level was 4,037.8 billion yuan, a year-on-year decrease of 168%, of which the income from the transfer of state-owned land use rights was 3,499.2 billion yuan, a year-on-year decrease of 205%。
Specifically, in the first three quarters of 2023, consumption contributed 83 percent to economic growth2%, driving GDP growth by 44 percentage points, which is even higher than the pre-pandemic level (595%）。From January to October, retail sales of services increased by 19% year-on-year, significantly higher than the growth rate of retail sales of goods (5.).6%）。Tourism, catering, entertainment and other sectors performed strongly. However, the high growth of consumption in 2023 is based on the low base of the previous year, and the overall consumption still shows a weak recovery after excluding the base effect. In 2024, more efforts are still needed on the consumption side, so that the momentum of economic growth can shift from investment to consumption.
The data shows that in 2023, the export momentum will shift from traditional commodity markets to emerging markets, while the importance of emerging economies will increase. In terms of data, in the first three quarters of 2023, among China's top 20 export** partners, the share of emerging economies in China's exports increased from an average of 27 in 2013-20228% to 343%。Among them, the growth rate of China's exports to emerging markets such as ASEAN, Russia, Africa, and Latin America was respectively9%, better than the overall growth rate of exports. In 2024, most industries in the United States are about to enter the inventory replenishment cycle, and the import demand for consumer electronics, furniture and building materials, food and agricultural products, textiles and garments and other goods may expand, which will help boost China's exports. From the perspective of export destinations, it is expected that exports to the United States are expected to improve, exports to Europe may remain stable, and exports to emerging economies are still an important support.
In terms of products, electronic components have become the largest commodity category in China's exports, and electronic components still have good prospects considering the recovery of electronic products such as smartphones in 2024. What is more noteworthy is that cultural products have entered the top 10 of China's export commodities for the first time, and China's 5,000-year-old culture is the most profound, and a breakthrough in this area is conducive to establishing long-term advantages.
Therefore, the economy is not expecting a V-shaped reversal today, which is unrealistic. Rather, it is an L-shaped restoration. In particular, according to the Bank of China Research Institute, China's potential economic growth rate from 2021 to 2025 is 5%-55%, and the potential economic growth rate from 2021 to 2035 is 43%-4.4%, and the trend is slowing down year by year. Problems such as labor shortage, slowing down the rate of human capital accumulation, declining physical capital formation rate, and slowing down the growth rate of total factor productivity may persist. All of this takes time, including management's mention of building first and then breaking. In fact, the replacement of old energy sources with new energy, including the emergence of new economic engines, also takes time, takes time, and it is more durable.
The phenomenon of mutual corroboration between the economy and the financial market
Many investors have asked, can ** and the economy be used as a barometer of each other? Is it possible to verify some factors with each other? The answer is yes, in fact, we need to do a comprehensive combing of the best aspects, which is far more meaningful than talking about various "cattle" every year. First of all, we noticed that before 2001, it was all technical analysis, and Zhuang stocks abounded, and in 2003, the collapse of the Delong system and the rise of the "Five Golden Flowers" began to popularize the concept of value investment in A-shares. Therefore, at different stages, there are different game strategies, which come from market factors, and this requires shareholders to be in awe and unconditionally obey.
The 2005-2007 bull market, what is the background? In fact, there are factors such as share reform and exchange rate reform, and at the same time, the major industries of China's economy have developed greatly, commodity prices have risen, and the real estate industry has become a pillar industry, and at the same time, it has grown rapidly, which has made 2007 after 5-30, and there has been a round of craziness in group stocks. Subsequently, the 2008 bear market, which lasted until 1664 on October 28, 2008, came from the global financial crisis, but although it was tragic, it was quickly repaired, and from August 2009 to November 2010, the market recovered quickly.
Therefore, this bear market is brutal in amplitude, not time, so what corresponds to it? ** market, weak cycle, this time consumes time, not amplitude. The period from 2011 to 2014 is a typical cycle in which there is no specific drug for the economy, and the related difficulties are difficult to solve, so it can only be grinded by time, which also means that all kinds of hot spots can only be active for a short time, and then the band switching will be formed. Therefore, we see that even from 1949 to 1849, there are only 100 points, but it took more than 1 year. This is what needs to be clear to stockholders, not always the best point, but more importantly, the rhythm of operation, so as to determine the strategy.
From the fourth quarter of 2014 to the third quarter of 2015, this is a wave of capital leverage bull market, so what we see is an elephant dancing, because of the flood of funds, so we will look for a large amount of **, so as to increase returns. With the tightening of capital leverage, entering the leveraged bear market, it is another wave of sharp falls, this bear market, is also tragic, and the time is not long, so from February 2016 to January 2021, the formation is a beautiful 50, blue chips in various industries, and the activity of leading stocks, which is a key market factor.
And we note that since February 2021, it has been another round of ** market cycle, at this time, economic factors, regardless of whether the epidemic factor or not, are actually facing transformation, including the transformation of the real estate model to services and technology, and the simple release of water cannot stimulate economic ......Many problems cannot be solved in a short period of time, and there is no specific cure, so we can only rely on time to complete the adjustment of the economic structure. At the same time, many problems began to manifest, refinancing, restricted stock lending, T+0 quantification, helping listed companies to find that the major shareholders of listed companies shorted themselves, etc., all of which led to the market can only be the first market, in fact, this is similar to the economic aspect, and it is an L-shaped repair cycle.
The year is favorable, and time and patience brew opportunities
What will 2024 bring? It is also favorable, the biggest factor comes from the end of the Fed's interest rate hike, and it is becoming more and more clear that the interest rate cut cycle will enter in 2024, which is beneficial to the economy and financial markets, especially for us to naturally have some depth space. The data shows that the probability of A-shares** in the downward range of US bond interest rates (2001, 2007, 2019) is relatively high, and from a structural point of view, the value style of US bond interest rates in the upward stage significantly outperforms the growth style, while the growth style significantly outperforms the growth style after the downward inflection point of the US bond interest rate.
In addition, the RMB exchange rate, which represents the expectations of the domestic economy, has gradually peaked and fallen, and the offshore RMB exchange rate hit 7After a high of 36, it maintained a high level** and accelerated its appreciation in November, and December has come to 713-7.14。From the perspective of the correlation between the RMB exchange rate and Wind All A, after the RMB entered the appreciation cycle, Wind All A performed better. The interest rate gap between China and the United States, which has continued to widen in recent years, has begun to narrow, and the interest rate gap between China and the United States has affected the willingness of global capital to allocate RMB assets, and foreign capital will also return in 2024. Historically, after the spread between the 10-year Treasury bonds between China and the United States has narrowed, Wind All A has tended to strengthen significantly.
From the economic side, the strong recovery in 2023 has been falsified, it is a weak recovery, and this is likely not to be partial, but the norm, that is, after experiencing high economic growth, it is now necessary for China's economic structural reform, but the epidemic has interfered with this factor, which has postponed this factor, or let it be temporarily covered up. The most typical is the reform of the real estate economy, which is also very crucial. Real estate investment has seen a rapid decline in recent years, and the property-driven growth of the past has been challenged. The current bottom line of real estate is not to trigger problems in the financial system and people's livelihood. So, whether the transformation can be successful, and how long this experience will last, is very noteworthy, but the transformation is inevitable, and only in this way will there be a way out, the formation of a healthy real estate market, which is also what all parties are willing to see, and the economy will find a stable growth point again.
In addition, from the perspective of valuation, the relative cost performance of stocks and bonds is currently at a high historical quantile, and the historical quantile of risk premium is 877%, which means that the current valuation of the relative bond market is low, corresponding to the possibility that the excess return of the relative bond market may be higher in the future, especially the overall valuation of the growth style is only the historical 7% quantile, so the repair factor in 2024 is worth looking forward to. Therefore, the most noteworthy earnings factor in 2024 comes from the switch of style hotspots, and these have a lot to do with the Fed. At the same time, as the economy stabilizes and repairs, there will also be opportunities for the market to recover, which will take time and are worth looking forward to.
Author: Yu Ming, an investment expert, a well-known financial blogger on Weibo, a financial writer, and the author of "Calendar Stock Buying Law" and "The First Lesson of Unraveling".