CITIC Securities: How will the Fed's interest rate cut cycle affect the direction of Chinese assets?

According to the information from the Wise Finance APP, CITIC Securities released a research report stating that since Powell signaled easing, the market has started a round of interest rate cut trading. Currently, the US economy's unemployment rate remains relatively low, the service industry and overall employment outlook are still relatively high. The purpose of the Fed's interest rate cut at this point is to ensure a smooth landing for growth, so the pace of interest rate cuts may not be fast within the year. Historical experience shows that after the interest rate cut starts, there is a higher probability of good performance in US stocks, US bonds, and gold. The impact of the Fed's interest rate cut cycle on Chinese assets depends on two factors: the linkage between the US and Chinese currencies and China's domestic growth expectations. Historically, US and Chinese monetary policies are not always completely linked, so the assessment of Chinese assets still needs to return to domestic factors. The certainty of the start of the US interest rate cut cycle is high, and the focus is on the magnitude and pace of the game. Powell has provided a clear monetary path: the timing for monetary policy adjustment has arrived. After Powell provided guidance on interest rate cuts, the market traded that the US would significantly cut interest rates. Currently, the market trades that the interest rate cut within the next year will reach 225 basis points. Historically, it can be seen that a rapid and substantial interest rate cut by the Fed is triggered only by deep economic recession or external shocks (such as financial risks or epidemics). Since 1984, out of 6 interest rate cut cycles, there have been 3 instances where a rapid interest rate cut of over 200 basis points occurred within a year, triggered by events such as deep economic recession, bursting of the dot-com bubble, and epidemic shocks. Reviewing historical experience, after the interest rate cut starts, US stocks, US bonds, and gold tend to perform well. (1) US Bonds: In the four interest rate cut cycles since 1995, except for the 1995 interest rate cut cycle, in the other three instances when the interest rate cut started, US bonds rose. The rise in US bonds is more sustainable, with weak overextension. (2) US Stocks: Unless instability in the financial system is the reason for the interest rate cut, after the interest rate cut cycle starts, there is a high probability that US stocks will continue to rise. (3) Gold: Since 1989, except for the 2001 interest rate cut cycle, in the other 4 interest rate cut cycles, in the month when the interest rate cut cycle started, gold had positive returns. (4) Commodities: The performance of commodity prices represented by copper and oil is uncertain. Historically, in the month when the interest rate cut cycle started, there is a high probability of copper prices falling, while oil prices are more likely to rise. To evaluate the direction of Chinese assets, we still need to focus on Chinese factors themselves. The two countries are in different economic cycles, facing different economic issues. The Fed's loose policy may lead to global capital flowing into emerging markets, increasing risk appetite. However, the spillover effect of liquidity depends on expectations of China's fundamental improvement. The US starting an interest rate cut cycle does not mean that the People's Bank of China will immediately follow suit with a significant easing. The People's Bank of China is paying attention to global monetary trends but is currently more focused on resolving domestic financial risks. This means that we cannot infer that the People's Bank of China will immediately follow a significant easing of monetary policy just because the Fed has started an interest rate cut. The progress in resolving domestic financial risks may be an important anchor for us to observe the recent operations of the central bank