Years of the bull market in U.S. stocks ended and the recession of trading began.

The worry of high inflation and monetary tightening superimposed recession has ended the 13-year bull market of US stocks. With the deterioration of fundamentals, US stocks are expected to continue the status of "recession trading" in the second half of the year. At the same time, taking inflation, supply chain, logistics, and other factors into account, the performance of US stocks is expected to continue the downward revision trend in stages since the beginning of the year. CITIC Securities believes that before the anticipated change of the Federal Reserve's monetary policy is formed, it is difficult for US stocks to see a sustained rebound, and "recession trading" will be the theme throughout the second half of the US stock market.CITIC Securities suggest paying attention to three main lines: 1) varieties that benefit from "consumption downgrade"; 2) Energy companies with low valuation and high profit; 3) A technology blue-chip with strong certainty.

As of June 13th, the S&P 500 and NASDAQ index dropped by 21.8% and 32.7% respectively from their high points, announcing the start of a bear market. Since March this year, with the Federal Reserve's monetary tightening, the Russian-Ukrainian conflict leading to soaring commodity prices, and the local epidemic in mainland China disturbing the global supply chain, the performance of U.S. stocks reflects investors' worries about "stagflation". However, since mid-May, the market has obviously switched from trading "inflation" to trading "stagnation". Both the S&P 500 and the Nasdaq have consistently outperformed the Dow with higher cycle weight. The yield of 10-year U.S. Treasury bonds has dropped by nearly 50bps from the high point on May 9th, and the yield of major maturities has been upside down again recently, indicating that the risk of recession has intensified.

The consumer confidence index of the United States in June has dropped to the lowest point in history, and the personal savings rate in April has also dropped to the level during the 2008 financial crisis. NFIB survey shows that SMEs' outlook for future economy and sales continues to deteriorate, while CNBC's latest CFO survey shows that 82% of CFOs of American companies interviewed predict that the US economy will fall into recession by the first half of next year.

CITIC Securities believes that from the second half of this year, the US economy will fall into recession, which will last for at least half a year.

In the second half of the year, the global oil price is unlikely to drop significantly due to the unresolved conflict between Russia and Ukraine and the trend rebound of China's economy. However, the inflection point of rent growth in the United States lags behind the inflection point of house price growth, and the former may continue to rise in the second half of the year. On the other hand, in view of the fact that American retailers have started to destock, the price of consumer goods is expected to fall when demand weakens.

CITIC Securities believes that if the real economy deteriorates rapidly from the third quarter, it will not rule out that the Federal Reserve may be forced to raise its inflation tracking target to ease the pressure on economic growth and financial system stability.

Considering inflation, supply chain, logistics, strong US dollar, and other factors, it is expected that the performance of US stocks will continue the downward revision trend in stages since the beginning of the year. Finally, as financial conditions continue to tighten, it is difficult to see the continued net inflow of institutional and retail funds into the US stock market.

CITIC Securities believes that before the expected turn of the Federal Reserve's monetary policy is formed, it is difficult for U.S. stocks to see a sustained rebound.

1. Consumer varieties with relative defensive attributes, especially the main line of "consumption downgrade", including McDonald's,

Campbell SoupSoup, Kraft Heinz and discount retailer Dollar Tree;

2. Short-term oil prices are expected to remain high, and the profits of energy companies are also expected to remain high. It is suggested to pay attention to Chevron and ExxonMobil, whose valuations are at historically low levels, and their profits have maintained rapid growth;