CICC's Liu Gang: US stocks return to historic highs, what should we focus on in Q3?

Liu Gang, a strategist at Zhongjin, stated on a self-media platform that the US stock market has recently hit historic highs again, with the Nasdaq outperforming most global indices. The firm had advised against short selling on April 8. Concerns about the "three killings" of stocks, bonds, and exchange rates stem more from short-term liquidity shocks and long-term extrapolation expectations rather than deteriorating fundamentals. In the outlook for the second half of 2025, Zhongjin believes that there is a problem of high convergence in the expectation of "de-dollarization", which is difficult to provide short-term operational guidance. A slight decline in the US dollar is beneficial to US stocks, and the market's misconception lies in directly linking "de-dollarization" with the weakening of the dollar. However, attention should still be paid to potential disruptive factors such as tariff negotiations and debt ceilings in the third quarter. Key points from Zhongjin: Yesterday's closing saw US stocks hitting historic highs again. Over the past two months, despite concerns about "de-dollarization" and the "three killings" of stocks, bonds, and exchange rates, the Nasdaq rebounded by 30% from the bottom on April 7, outperforming most global indices, including Hong Kong stocks. The firm hinted near the bottom on April 8 that the Nasdaq's valuation had dropped to 20 times earnings, gradually becoming attractive, or at least should not be shorted anymore. The worries about "three killings" were most severe at the time of the hint, and these concerns were more due to short-term liquidity shocks and long-term worries based on extrapolations. In the outlook for the second half of 2025, the firm does not particularly agree with the consensus on "de-dollarization", suggesting that this expectation is highly convergent and mainly based on grand narratives that cannot be confirmed or refuted. The biggest problem with grand narratives is the inability to provide short-term operational guidance, such as whether it will be realized in five years or within the year, whether it will fall by 50% or 5%, are all difficult to answer. The decline in the US dollar is not always a manifestation of "de-dollarization", and a slight decline is actually beneficial for US stocks. The misconception in the market is directly equating de-dollarization with weak dollar, and weak dollar with weak US stocks. Therefore, the firm advises to be aware of the possibility of US stocks outperforming or even a slight strengthening of the US dollar, as the credit cycle may recover again in the second half of the year. However, now that the market is rising, everyone is once again paying attention. It may be advisable to be a bit more cautious in the short term, as there are still a few hurdles to overcome in the third quarter, such as tariff negotiations, debt limits, bond supply, etc. In July and August, although they are all "known cards", disturbances at high levels cannot be ruled out. However, volatility still provides opportunities, both in US stocks and US bonds.