China Merchants Macro Research points out that in terms of asset allocation, the market in June has reverted to a barbell strategy coupled with a defensive approach. Apart from domestic economic fundamentals being relatively weak, this shift may also be influenced by the strengthened resonance of the US dollar and US stocks. Since last year, there have been three instances of US stocks and the US dollar resonating upwards (May 2023, late December 2023 to mid-February 2024, and June 2024), which have not only caused A-share declines but also weakened gold due to the pronounced siphoning effect of US stocks during this period.
Approaching the upcoming elections, overseas investors may gradually cash out their US stock gains, and there is a possibility of the Federal Reserve cutting interest rates more than expected post-elections. In the short term, attention is focused on economic data from Europe and the US. If June non-farm payroll and other data fall short of expectations, or if there is a slight improvement in the European situation leading to a decline in the US dollar, the domestic market may see alleviated pressure.
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