People's Livelihood Macro: In the future, the market's reaction will be more like May than April

After June, Trump's tariffs suddenly changed, and risky assets were once again in turmoil. Geography, markets and even policies "will repeat the mistakes of April" may be the biggest doubt in the market. We believethatthe biggest difference between this round and April lies in China's response attitude of "flying in chaos and still calmly"-it does nottit-for-tat and continues to escalate countermeasures, but explains the situation, clarifies the bottom line, andthe White House's policy on tariffs and other policies."Leave room"(not effective immediately, leaving time for negotiations), which reduces the temperature for possible escalation of friction.
It now looks more like May than April. Thescript in April was for tariffs to continue to increase, and finally the United States chose to make concessions when the market was overwhelmed; inMay, after the first negotiation, the tone of the two sides 'intention to avoid derailing had been set, and periodic frictions were still controllable, and finally broke through phone calls. This time, combined with Trump's restraint in answering reporters 'questions over the weekend and China's rational response,we still believe that this tone between the two sides has not changedand will not become a turning point in the market.
There have been signs of this tariff escalation before.Afterreaching a preliminary agreement on Tiktok in September, the United States continued to make "small moves." In particular, onSeptember29, the United States issued the strictest 50% equitypenetration control rule in history to further strengthen the technical blockade. China subsequently upgraded export controls on rare earths and key technologies. It is against this background that Trump's tariff escalation was launched.
We have three basic understandings about this:First, the more outrageous the tariff,the greater the probability of TACO.Theexperience of April has proved that a100%tariff is also beyond the reach of the United States, and Trump has set the effective date onNovember1-because November 1, U.S. Eastern Time,corresponds to East Asia. OnNovember2, when theAPECSummit has ended,APEC is still an important communication window.
Secondly, objectively speaking,a mess within the United States will make Trump's tariff policy even more constrained. Compared with before, the current U.S. government is still shutting down, the risk of large-scale layoffs is rising, and the Republican Party is still "fighting" with the Democratic Party on budget issues.
Moreover,the market's mentality has changed a lot compared with before. On the one hand, the pricing of Trump's policies has become moretolerant; on the other hand,the market's bear-bull mentality has also changed significantly, especially inChina's stock market.
In terms of the market, comparing April and May, although there was adjustment pressure, the latter was significantly less than the former. The core difference is thatApril reflected some panic in the face of future uncertainty, while May was the market's pricing of frictions and twists and turns in order to avoid getting out of control.
As a result, we tend to expect the market's reaction to be more like May than April for some time to come.Compared withApril, the overseas market has become more "calm" this time: although U.S. stocks fell, the decline was controllable compared toApril, the volatility was also at a low level, and the sell-off of U.S. dollars and U.S. bonds was not obvious.
In addition, Trump's wait-and-see signal in answering reporters 'questions at the White House over the weekend and China's rational and calm responsemean that the bottom line of both sides remains. At the same time, although treasury bonds rose on Saturday, reflecting certain risk aversion, the increase was very limited, and the market was also pricing Trump's expectation of another "TACO".
Therefore, for theA-sharemarket next week, the adjustment may be relatively controllable. Compared withApril, the current market has accumulated more coping experience. Coupled withthe stabilizing effect of policy funds at critical moments, market risk appetite is expected to remain resilient. However, as an offshore market, Hong Kong stocks are more sensitive to emotional shocks and capital flows, and may have greater fluctuations and pressures.
But this is notthe reason to "bargain hunting" or aggressively price "TACO" in the short term. China and the United States can maintain the bottom line, but there may not be much agreement content that can be expected in the short term. It is still in the "playing period" of Sino-US policies, and the tactical game has not yet been settled. In addition, compared withApril, stock market prices and valuations are significantly higher, especially for some technology stocks.
Structurally, short-term market styles or phased changes, but the main line logic is clear:in the short term, funds may flow into defensive sectors such as dividends due to safe-haven needs; but from a medium-to long-term perspective, in the context of the interpretation of Sino-US relations,rare earths, Domestic substitution and military industry are still the core lines and have continuous allocation value. As for cyclical sectors such as domestic demand, the pace of repair depends more on the specific implementation of subsequent domestic policies to stabilize growth, and there is no need to rush it.
Risk warning:U.S. economic and trade policies have changed significantly; tariff proliferation exceeded expectations, resulting in a faster than expected slowdown in the global economy and an increase in market adjustments.