Guotai Haitong Securities has released a research report stating that as the U.S. transitions from a "K-shaped divergence" to a "reflation" phase, recent global liquidity conditions also appear to be shifting from a slowdown in easing expectations to a rise in tightening expectations. Bitcoin, acting as a barometer for global liquidity, has accurately priced these two stages. Correspondingly, globally liquidity-sensitive assets like the Hang Seng TECH Index and the Nasdaq have come under pressure successively, while internal style rotations have occurred within the A-share market. Under the expected policy mix of "interest rate cuts + balance sheet reduction," this is destined to be an atypical reflation trade (sometimes resembling stagflation trading more closely). Attention should be paid to the correlations among broad asset classes under the influence of global liquidity "tides."
The main viewpoints of Guotai Haitong are as follows:
**The Origin of "K-Shaped Divergence" - Structural Characteristics of U.S. Balance Sheets**
The balance sheets of the U.S. private sector are relatively healthy (particularly for groups that increased leverage during the post-2020 pandemic QE phase), resulting in high-net-worth individuals holding substantial net assets (primarily real estate and equities). Furthermore, the U.S. interest rate structure post-pandemic has been unique. Due to significant credit expansion occurring during the QE phase, the existing mortgage rates for high-net-worth individuals are not particularly high (currently at 4.2%). In contrast, the current rate for new 30-year loans is 6.1%, leading to markedly different interest rate sensitivities.
High-net-worth individuals can monetize their net assets through cash-out refinance loans, supporting consumption resilience and U.S. stock market liquidity. Therefore, when the spread between old and new loan rates (the marginal cost of refinancing expansion) narrows, the momentum for refinancing expansion strengthens significantly. Conversely, "new borrowers" are in the opposite situation, needing to exchange cash flow and debt for assets. If the economic outlook does not show a trend reversal, this group's sensitivity to interest rates is relatively weak. This is the essence of the U.S. economy's "K-shaped divergence": high-net-worth individuals, represented by the U.S. stock market, form the upper part, while new borrowers, represented by the real estate sector, form the lower part.
**The Path to "Reflation" - When "K-Shaped Divergence" Turns to "Reflation"**
The report observes that recently, the lower part of the U.S. "K-shaped divergence" is converging upwards towards the upper part. In other words, expansion by high-net-worth individuals through refinance loans has stabilized expectations for the real economy and asset prices, creating favorable conditions for expansion by "new borrower" groups, thereby achieving a dynamic where "prosperity drives further prosperity." The housing sector, corresponding to the lower part, happens to be the "source of inflation." The U.S. economy appears to be quietly transitioning from "K-shaped divergence" to "reflation."
**The "Self-Reinforcing" Mechanism of Inflation Expectations**
In fact, inflation expectations dominated by demand-side factors possess a "self-reinforcing" mechanism. Firstly, strengthening inflation expectations can passively lower real interest rates. Secondly, credit spreads (mortgage rates minus Treasury rates) are pro-cyclical; inflation expectations can compress these spreads. Consequently, a counterintuitive phenomenon is observed: the current real mortgage rate in the U.S. (adjusted for inflation expectations) is at its lowest point in the past three years and continues to decline unilaterally. This precisely explains why long-end U.S. Treasury yields have been oscillating higher recently, while the housing sector, representing the lower part of the K-shape, is recovering against the trend.
**The Manifestation of Liquidity "Tides" in Assets**
As the U.S. shifts from "K-shaped divergence" to "reflation," recent global liquidity seems to be moving from a deceleration in easing expectations to a pickup in tightening expectations. Bitcoin, as a global liquidity barometer, has accurately priced these two stages. Accordingly, globally liquidity-sensitive assets like the Hang Seng TECH Index and the Nasdaq have faced sequential pressure, and internal style rotations are occurring within A-shares. Under the anticipated policy combination of "rate cuts + balance sheet reduction," this is destined to be an atypical reflation trade (sometimes resembling stagflation more closely). For example: the U.S. dollar is rebounding but not strongly (compared to Q4 2024); the trend of the RMB exchange rate remains unchanged (anchored to short-term U.S. Treasuries). Focus on the correlations among broad asset classes under the influence of global liquidity "tides."
Risk warning: Policy uncertainty associated with the new Federal Reserve Chair.
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