Guotai Haitong: The United States is shifting towards "re-inflation" Pay attention to the global liquidity "tide" under the linkage of major asset classes

Guotai Haitong released a research report stating that as the United States transitions from "K-shaped differentiation" to "reinflation," global liquidity seems to be shifting from expectations of easing to expectations of tightening. Bitcoin, as a barometer of global liquidity, accurately reflects these two stages. Consequently, stocks such as Hengke and Nasdaq, which are sensitive to global liquidity, have been under pressure, leading to a shift in the internal style of A-shares. With the expected policy combination of "rate cuts + balance sheet reduction," it is destined to be a non-typical period of reflation trade (sometimes more like stagflation trade). It is important to pay attention to the linkage of major asset classes under the "tide" of global liquidity. Some key points from Guotai Haitong include: The origin of "K-shaped differentiation" The structural characteristics of the balance sheet of the United States. The balance sheet of the private sector in the United States is quite healthy (especially the group that leveraged after the post-epidemic QE phase in 2020), resulting in a large amount of net assets (mainly real estate and equities) for high net worth individuals in the United States. Additionally, the interest rate structure in the United States post-epidemic is quite unique, as a large amount of credit expansion occurred during the QE phase, resulting in a relatively low stock mortgage interest rate for high net worth individuals (currently at 4.2%). In comparison, the interest rate for new 30-year loans is at 6.1%. Differential interest rate sensitivity The "high net worth group" can liquidate their net assets through refinancing loans (cash-out refinance), supporting consumption resilience and stock liquidity. Therefore, when the interest rate spread between new and old loans narrows, the momentum of refinancing expansion significantly increases. On the other hand, the "new borrowing group" needs to exchange cash flow and debt for assets. If there is no trend reversal in economic expectations, this group is less sensitive to interest rates. This is the essence of the "K-shaped differentiation" in the U.S. economy: the "high net worth group" corresponds to the upper end represented by the stock market, while the "new borrowing group" corresponds to the lower end represented by the real estate sector. The path of "reinflation" When "K-shaped differentiation" transitions to "reinflation" The bank has observed that the lower end of the "K-shaped differentiation" in the U.S. is converging towards the upper end. In other words, the "high net worth group," by expanding through refinancing loans, has stabilized economic and asset price expectations, creating favorable conditions for the expansion of the "new borrowing group" and achieving a "rich first, then rich" scenario. The housing sector corresponding to the lower end is precisely the "source of inflation." The U.S. economy seems to be silently transitioning from "K-shaped differentiation" to "reinflation". The "self-reinforcement" mechanism of inflation expectations In fact, inflation expectations driven by demand have a "self-reinforcement" mechanism. Firstly, strengthened inflation expectations can passively reduce real interest rates, and secondly, credit spreads (mortgage rates - government bond rates) have a cyclical nature, as inflation expectations can compress credit spreads. Therefore, a counterintuitive phenomenon is that the current real mortgage rates in the United States (excluding inflation expectations) are at the lowest point in the past three years and are still unilaterally declining. This explains why long-term U.S. bond rates have been fluctuating higher recently, while the housing sector at the lower end of the K-shaped differentiation is experiencing a counter-trend recovery. Tangible manifestation of liquidity "tides" As the United States transitions from "K-shaped differentiation" to "reinflation," global liquidity seems to be shifting from expectations of easing to expectations of tightening. Bitcoin, serving as a barometer of global liquidity, has accurately priced these two stages. Correspondingly, stocks such as Hengke and Nasdaq, which are sensitive to global liquidity, have been under pressure, leading to a change in the internal style of A-shares. With the expected policy combination of "rate cuts + balance sheet reduction," it is destined to be a non-typical period of reflation trade (sometimes more like stagflation trade). For example: the U.S. dollar rebounds, but not vigorously enough (compared to Q4 2024); the trend of the RMB exchange rate remains stable (anchoring short-term U.S. bonds). It is important to focus on the linkage of major asset classes under the "tide" of global liquidity. Risk warning: Uncertainty in the policy of the new chairman of the Federal Reserve.