CITIC Construction Investment: Short-term risk appetite improvements continue to suggest allocation opportunities for US stock technology

The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the conflict between the US and Iran continues, and major asset categories were generally adjusted in March. As the climax of the first wave of conflict passes, we enter a negotiation period+desensitization period, and a short-term trading rebound is possible. However, it is not appropriate to be overly optimistic. It is difficult for the market to reproduce the trending upward trend after last year's tariffs, and it is not ruled out that there will still be a decline. Continue to suggest allocation opportunities for US stock technology. The current valuation has been drastically reduced, and the valuation premium of technology over the general market has almost disappeared, but EPS expectations continue to rise. If subsequent financial reports exceed expectations, there may be strong catalytic effects. If there is another wave of decline in US stocks, it is recommended to actively increase their holdings.

CITIC Construction Investment's main views are as follows:

Overview of major asset classes for January and March

The conflict broke out and continued. Both sides failed to take absolute dominance on the battlefield. The Strait of Hormuz was blocked, economic concerns heated up, expectations of the Federal Reserve's interest rate cuts were reversed, and Trump's erratic remarks further disrupted the market.

Global assets were generally impacted. US stocks and US bonds were weighed down by the risk of stagflation. Commodities showed signs of deleveraging after the extreme market in the early period, and only oil prices (supply shock) and the US dollar (safe-haven demand) were supported.

Outlook for major asset classes in February and April

1. Overall trend

The climax of the first wave of conflict has passed, and we have entered a negotiation period+desensitization period. Short-term transactions can rebound. However, it is not appropriate to be overly optimistic. It is difficult for the market to reproduce the trending upward trend after last year's tariffs, and it is not ruled out that there will still be a decline.

(1) Looking at the market position, after the current round of US-Iran conflict, the decline in major assets was far lower than last year's tariff shock, or even worse than in common cases of retracement. Currently, the positions of US stocks, US bonds, and commodities are all at a neutral level for nearly half a year. The market is more like using this incident to release pressure after rising at the beginning of the year, and there is limited room for further upward movement.

(2) Fundamental dimensions. Some core conflicts still need to be resolved. For example, how much is the impact of inflation, whether the Federal Reserve will cut interest rates, whether oil prices can return to pre-conflict (currently at 90 high), AI capital expenditure and revenue issues, private credit risks, whether the war is driving up fiscal deficits, etc.

(3) Since the conflict, the overall market was still based on Trump's TACO pricing, and the core negative feedback that forced Trump and the US to compromise came from the deterioration of financial markets and negative feedback that forced other countries to intervene in mediation, and from rising oil prices. Currently, however, the decline in US stocks and US debt is limited, and the oil price center is far from reaching the level after the Russian-Ukrainian conflict. Whether it is enough for Trump to follow suit is still questionable. It is not ruled out that a round of sharp falls in US stocks and a sharp rise in oil prices will be needed before final negotiations are completed.

2. Opportunity tips

Continue to suggest allocation opportunities for US stock technology. The current valuation has been drastically reduced, and the valuation premium of technology over the general market has almost disappeared, but EPS expectations continue to rise. If subsequent financial reports exceed expectations, there may be strong catalytic effects. If there is another wave of decline in US stocks, it is recommended to actively increase their holdings.

Risk warning: The rise in US inflation exceeded expectations, and the US economic growth exceeded expectations, leading to the continued tightening of the Federal Reserve's monetary policy, sharp appreciation of the US dollar, rising interest rates on US bonds, continued falling US stocks, bankruptcy crises of commercial banks, and monetary and debt crises in emerging markets. The recession in the US economy exceeded expectations, leading to a liquidity crisis in the financial market, and the Federal Reserve was forced to switch to easing. Europe's energy crisis has exceeded expectations, the Eurozone economy has fallen into deep recession, the global market is in turmoil, external demand is shrinking, and policies are facing a dilemma. Global geopolitical risks have intensified, Sino-US relations have deteriorated beyond expectations, uncontrollable factors have occurred in commodities and transportation, the degree of anti-globalization has further deepened, supply chains continue to be destroyed, and competition for related resources has worsened.