CITIC SEC: US stocks suitable for buying on dips next year; gold prices expected to see a recovery

CITIC SEC released a research report stating that the global economy maintained resilience this year, the Middle East situation has shown a glimmer of peace, and the "blue wave" in the midterm elections is expected to influence the market narrative direction next year. It is expected that the US economy will grow moderately at a more balanced pace next year, the EU's domestic demand should continue to expand, and Japan's economy is expected to recover. The impact of the oil price shock will weaken next year, overall inflation in Europe and the US may fall back after experiencing a blunt peak, and Japan's headline inflation rate will be significantly suppressed by policy. The European and US central banks are already near the end of this rate hike cycle, while the Bank of Japan may raise rates quarter by quarter through the first half of next year. The US federal government deficit ratio is expected to be broadly stable, data center construction will face stronger constraints at the state level, and France's fiscal consolidation efforts risk falling short of expectations. US stocks may be more suited to a buy-on-dips strategy next year, with a preference for a balanced-style allocation approach; both US Treasury yields and the dollar index have room for modest declines, and gold prices are expected to see a recovery as expectations of liquidity tightening weaken. Economic growth: more moderate momentum. CITIC SEC expects the US economy's growth momentum to be more moderate next year and its demand structure more balanced. The tech investment boom should cool under a stricter financing and regulatory environment, traditional business investment is expected to recover, residential investment is likely to remain weak, consumption momentum may slow modestly, and labor market vitality may decline slightly. The EU's domestic demand should be able to sustain a steady expansion trend, and its trade deficit with China may narrow as trade barriers take effect. Japan's economy may recover as the energy shock fades, and a persistently tight labor market will support wage growth momentum and corporate automation investment demand. Inflation: concerns will ease. The oil price center is more likely to fall back than to spike, and the risk of core inflation re-accelerating is small. We expect US headline CPI year-on-year to hit a blunt peak in 26Q4, then fall rapidly from March next year under base effects, after which it will enter a phase of mild fluctuation. The euro area's wage growth center is expected to remain steady, and a decline in overall inflation should only be a matter of time. Japan's virtuous cycle of rising prices and wages is expected to continue over the long term; headline inflation is expected to be significantly suppressed by food tax cuts from 27Q2 and remain at a low level, showing a clear pattern of being high in the first half and low in the second half of the year. Economic policy: clearer boundaries. The European and US central banks are already near the end of this rate hike cycle. We expect the Federal Reserve to raise rates by 25bps this December and then hike at most once more next year; the ECB will end this hiking cycle after a 25bps hike this December; and the Bank of Japan may maintain a pace of 25bps hikes quarter by quarter through the first half of next year. After the Democrats sweep both chambers, US politics will enter a phase of greater internal friction, and data center construction will face stronger constraints at the state level. We believe states are more likely to address the negative externalities of relevant projects through appropriate institutional arrangements rather than shelving the approval process for the long term. The US will have insufficient capacity for fiscal expansion next year and weak willingness for fiscal consolidation; the federal government deficit ratio is expected to stabilize near 6%, and the debt ceiling issue does not pose much risk. The euro area's overall fiscal stance may tighten next year, with France expected to consolidate its finances but with the risk that efforts fall short of expectations, while Germany's fiscal expansion is expected to continue. The Takaichi cabinet's tax cut plan in Japan faces pressure to secure funding sources, and uncertainty over fiscal financing may continue to support JGB yields. Asset allocation: more balanced opportunities. The market's view of tech companies is becoming increasingly strict, and US stocks may face more frequent or sharper volatility next year. We are cautious about the financial risks of new cloud vendors and the room for price increases in computing hardware, but the growth narrative in the mid- and downstream of the computing power chain should still hold. Traditional sectors are not lacking in valuation appeal and are expected to benefit next year from weakening expectations of liquidity tightening and support from economic momentum. US stocks are suited to a buy-on-dips strategy, and we prefer a balanced-style allocation approach. The 10-year US Treasury yield should have already confirmed its peak; after the midterm elections, improved market confidence in US fiscal discipline and better expectations for dollar liquidity may bring it down to around 4.5%. The dollar index may decline modestly next year and fluctuate weakly below the 100 mark. Gold may regain the necessary conditions for capital inflows by the end of this year, gold prices are expected to see a recovery, and the timing of the sentiment turning point is worth seizing.