Zhongjin: The US Dollar and US stocks are not simply linked. Even under a weaker dollar, US stocks may still strengthen against the trend.

CICC released a research report stating that the current highly convergent consensus of "de-dollarization" based on grand narratives is facing two real problems: excessive crowded expectations and the inability of the grand narrative to provide specific guidance for short-term operations. The bank believes that the relationship between US stocks and the US dollar is not one-way and linear. A weak US dollar does not necessarily mean US stocks will fall, and a fall in US stocks does not necessarily mean the US dollar will weaken. Historically, if the US can benefit more from a weak US dollar, even if the dollar depreciates significantly, US stocks can continue to strengthen. Furthermore, a weak US dollar sometimes reflects capital outflows from the bond market, rather than the stock market. The US dollar is influenced by growth differentials, monetary policy, and safe-haven demand, while US stocks reflect their own fundamentals more. CICC's main points are as follows: "Equal tariffs" have not only caused turbulence in global markets, but the bigger "aftermath" is the impact on market confidence in US dollar assets as safe assets, making "de-dollarization" a consensus. Global markets have recovered their losses since the introduction of equal tariffs, except for the US dollar which remains low, reflecting a specific situation. Market concerns are not only about the US dollar itself, but also about the erosion of the US dollar asset status as a safe reserve asset, which in turn affects US bonds and stocks, leading to the "triple kill" of stocks, bonds, and the currency market in late April. However, the relationship between the US dollar and US stocks is not necessarily one of direct correlation. The weakening of the US dollar does not always lead to a decline in US stocks, and a decline in US stocks does not necessarily mean a weakening of the US dollar. Looking back at historical experiences since the 1970s, the trends of US stocks have been relatively independent of the US dollar, with various factors influencing both in different ways. In the short term, when the market is in turmoil and risk appetite declines, the US dollar tends to strengthen due to safe-haven demand. In extreme liquidity crises, massive selling of all assets by investors to raise cash (Dash for Cash) can lead to a significant strengthening of the US dollar. The underlying logic is that the US dollar is influenced by growth differentials, monetary policy, and safe-haven demand, while US stocks are more reflective of their own fundamentals. It is important to understand that the relationship between the US dollar and US stocks is not always straightforward, and various factors affect their movements in different ways. Looking ahead, the bank believes there is a possibility of the US credit cycle restarting in the second half of the year, mainly driven by expansion in the private sector, with fiscal impulses improving. The outlook for the US dollar is expected to remain weak in the third quarter with volatility, but a slight rebound is possible in the fourth quarter. The S&P 500 index is expected to range between 6000-6200 points. Overall, the bank suggests opportunities for trading in US bonds, preferring longer maturities initially and then shifting to shorter maturities after the peak in bond issuance. In conclusion, the bank highlights the importance of considering the underlying factors when assessing the relationship between the US dollar and US stocks, rather than focusing solely on surface-level trends. They emphasize the need for a nuanced understanding of the diverse factors that influence the movements of both assets.