According to a research report by CITIC Securities, the rise of US stocks starting in 2023 is due to a smooth decline in inflation. This logic has been broken since Q2, and US stocks will enter a safe haven mode. The short-term gold price of $2400 fully reflects the pricing of the escalating situation in the Middle East, while the expectation of the Federal Reserve's interest rate cut continues to cool. Gold above $2400 is operating in a moderate range. In the medium term, there are signs of a resurgence in US inflation in the future. Once the trend of inflation rebound is established, gold will follow the rise, and gold US stocks may shift from the current resonance rise to differentiation, and gold will have relative returns compared to US stocks. The situation in the Middle East is escalating, with oil prices reaching $100.
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CITIC Securities | US stocks officially enter safe haven mode, with oil prices pointing at $100
The rise of US stocks starting in 2023 is due to the smooth decline of inflation, which has been broken since Q2, and US stocks will enter a safe haven mode. The short-term gold price of $2400 fully reflects the pricing of the escalating situation in the Middle East, while the expectation of the Federal Reserve's interest rate cut continues to cool. Gold above $2400 is operating in a moderate range. In the medium term, there are signs of a resurgence in US inflation in the future. Once the trend of inflation rebound is established, gold will follow the rise, and gold US stocks may shift from the current resonance rise to differentiation, and gold will have relative returns compared to US stocks. The situation in the Middle East is escalating, with oil prices reaching $100.
US stocks: US stocks officially enter safe haven mode
In March, the prosperity of the US manufacturing industry rose above the boom bust line, with non farm employment exceeding expectations. However, the service industry's prosperity declined, wage growth slowed down, and the US CPI rebounded beyond expectations. After losing financial support, the negative impact of rapid interest rate hikes in the early stage on the economy will continue. It is expected that the overall US economy will continue to decline in the next quarter, with the manufacturing industry structurally better than the service industry.
The March US CPI data released in April continued to exceed expectations, with commodity prices rising and signs of secondary inflation already evident. The rise of US stocks starting in 2023 is due to the smooth decline of inflation, which has been broken since Q2. US stocks will enter a safe haven mode, and it is recommended to avoid it.
Gold: Moderate band operation above $2400 for gold, still bullish in the medium term
The short-term gold price of $2400 fully reflects the pricing of the escalating situation in the Middle East, while the expectation of the Federal Reserve's interest rate cut continues to cool. Gold above $2400 is operating in a moderate range. In the medium term, there are signs of a resurgence in US inflation in the future, and once the trend of inflation rebound is established, there is further room for gold to rise in the future. During periods of high inflation, gold has more credit hedging and anti inflation properties compared to the US stock market. Gold in the US stock market may shift from the current resonance rise to differentiation, and gold will have relative returns compared to the US stock market.
Crude oil: The situation in the Middle East is escalating, with oil prices pointing at $100
In terms of demand, OPEC stated in its latest monthly crude oil market report that it is expected that the global daily oil demand in 2024 will increase by 2.25 million barrels compared to 2023. The global daily oil demand in 2025 is expected to increase by 1.85 million barrels compared to 2024.
In terms of supply, the OPEC monthly report shows that OPEC's crude oil production in March was about 26.86 million barrels per day, an increase of 10000 barrels per day compared to February. In March, US crude oil production decreased to 13.1 million barrels per day. Saudi crude oil increased to 9.04 million barrels in March.
The conflict between Iran and Israel has escalated, and at the same time, US inflation data in March continues to exceed market expectations. OPEC crude oil production from January to March was significantly lower than the level at the end of last year. OPEC+member countries, led by Saudi Arabia and Russia, have agreed to extend the voluntary production reduction agreement of 2.2 million barrels per day until the end of June this year. Based on the above information, driven by supply, oil prices will maintain an upward trend and are expected to hit $100 in the context of the Iran Israel conflict.
The results of this report are all based on the corresponding asset pricing models for major categories, and caution should be exercised against the risk of model failure; History does not represent the future, and we need to be vigilant about the risk that historical laws will no longer be repeated; The model results are for research reference only and do not constitute investment recommendations; The current conflicts in overseas regions have not yet ended, and we still need to be vigilant about the risk of large-scale escalation of local conflicts; In the early stage, the United States raised interest rates rapidly, and the US economy has a certain degree of resilience. We need to be wary of the lagging impact of the weakening of US fiscal stimulus combined with a significant increase in interest rates in the early stage; The future inflation center has shifted upwards compared to the past decade, and we are wary of the risk of long-term high US bond interest rates. Currently, the Chinese economy is heavily influenced by domestic and international factors, and we still need to be vigilant about the risks brought about by slower than expected domestic economic growth.