Does A Stock Bull Mean A Debt Bear?

In the short term, interest rate debt is obviously adjusted due to the supply shocks of debt replacement, but in the wave of capacity contraction, we will not easily see interest rates on the trend.

When the new industry becomes the economic growth point, the external financing demand of the new industrial chain and the consumption of bank overstock are significantly weaker than that of the heavy industry chain driven by the real estate.

The bull market must mean a bear market for bonds, which we do not agree with.

In the past, risk-free interest rates did show a positive correlation with stock market performance, but the driving force of this relationship was the expansion of total economic demand.

In fact, this positive correlation has been broken in 2014, because the macroeconomic factors driving the performance of share debt have undergone profound changes.

Before 2014, there was a significant positive correlation between China's stock market and risk-free interest rate, and the main logical support came from the expansion of total economic demand.

Real estate investment and local government infrastructure are the core demand of the past, and also the core driving force of the total economic demand in the past.

When real estate and infrastructure investment accelerate, the capacity of heavy industry chain built around real estate infrastructure will expand accordingly.

Therefore, the core driving factor of the bull market in the past is "the expansion of total economic demand - the expansion of related industrial chains, the improvement of corporate profits - the rise of the stock market".

From the past general demand expansion driving stock bull market operation logic, because real estate and infrastructure are capital intensive industries, there are serious credit starvation and soft budget constraints, and the process of credit expansion leads to excessive consumption of banks.

In addition, under the pressure of rising prices and asset prices (mainly house prices), in order to prevent the economy from overheating, the central bank [micro-blog] monetary policy tends to tighten, and the pressure on both sides leads to bear bears. This shows that the stock market is positively related to interest rates.

But after 2014, the positive correlation between stock market and risk-free interest rate was broken, because the macroeconomic factors driving stock bull market changed.

The stock bull market moves from the logic of the expansion of aggregate demand to the contraction of production capacity.

"The downward trend in aggregate demand - the entity's capacity to release the backlog of liquidity - Stock Wealth Redistribution - stock market upturn" is the core driver of this bull market.

In short, liquidity and physical wealth redistribution (from real estate to finance) are the core logic of the current stock market rise rather than corporate earnings.

If the driving force of the stock market rises is the capacity contraction, then the bull market of stock will not necessarily correspond to the bear market of the bond.

Terminal demand atrophy (real estate, infrastructure), attached to their entire industry chain, there is no source of income, naturally have to inventory, leverage and pressure to produce.

The process is as follows: credit creation has gone against the reverse process, and the enterprise has changed from borrowing to paying debts, and the consumption of overrun has decreased significantly.

Become an inevitable trend, reflecting the risk free interest rate, will continue downward process.

Of course, there's another saying.

The performance is ahead of the economy, and the stock market rise reflects the economic recovery ahead of time, so sooner or later, the bond is still a bear market.

But if you agree that China's economic growth is going through the pformation of "old capacity" and "new economy", from the simple real estate drive to the total factor productivity promotion, then the recovery of the new economy and the external financing needs of the new industrial chain and the consumption of bank overstock are significantly weaker than that of the heavy industry chain driven by real estate.

If so, even if the new economy is formed, the risk-free interest rate will stop downward, but the operation center will be significantly lower than before.

Even from international experience, it is impossible to draw conclusions.

The cow means the conclusion of the debt bear.

Taking South Korea as an example, after the heavy blow of the Asian financial crisis in 1997, the South Korean government was determined to break the government's credit guarantee, clear out the invalid departments, and actively cultivate new economic growth points.

Judging from the results, after the Asian financial crisis, the Korean stock market and bond markets all witnessed a huge bull market.

With the help of the Asian financial crisis in 1997, the Korean government broke the tradition of credit guarantee and "big but not" for the chaebol.

In the process of economic capacity and "dilapidated", the Bank of Korea provided ample base money.

In addition, with the credit derivatives slowing down, the risk-free interest rate declined systematically after the financial crisis.

The old process is accompanied by the establishment of new.

After the crisis, the government provided a good macro and micro environment for the development of technology intensive SMEs through the tax cuts, credit support and property rights protection for emerging industries, and the pformation of economic structure was opened.

The technology intensive industry replaced heavy chemical industry as the new growth point of the Korean economy, and the bull market sentiment began to rise.

With the rise of the new economy, South Korea's economy has bid farewell to the era of heavy chemical industry.