Institutional strategy: A new cycle of profit growth is expected to start in the second half of 2025 or in 2026

Securities Times News, Huatai Securities said that looking forward, the Fed is still likely to cut interest rates by 25bp at the December FOMC, but the path of interest rate cuts in 2025 depends on the subsequent performance of the economy and the market. The US economy still has resilience, and the GDP growth rate in the third quarter remains high; the one-time shocks such as hurricanes and strikes led to a significant decline in the October non-farm employment, and the potential level of the job market still needs to be confirmed by the November data. The adjustment of the Fed's resolution statement has sparked speculation about whether the Fed will pause its interest rate cuts in December, and we believe that considering that Powell said that the current interest rates still have restrictive effects, and the job market is weaker than before the epidemic, the probability of the Fed cutting interest rates by 25bp at the December FOMC is still high.

CITIC Securities believes that the overall A-share Q3 2024 report is still in the bottoming state, with revenue and ROE continuing to decline, and the net profit differentiation further intensified, with the highlights still concentrated in domestic consumption, manufacturing with a good supply and demand pattern, technology and pharmaceuticals, but the varieties with unexpected results are increasingly rare, and the varieties with better profit growth in Q3 2024 include large finance, breeding, technology hardware, and nonferrous metals. Looking back at history, the expansion of broad fiscal spending will first be reflected in the stabilization and rebound of M2, industrial added value, and fiscal spending, but it still needs patience to transmit to PPI and A-share earnings. The turning point of social financing is still a good leading signal, which leads the price signal by about 3-4 quarters, and it is expected to start a new cycle of profit growth in the second half of 2025 to 2026.