Expectations of a Fed rate hike have cooled, global liquidity has shifted, and A-shares are facing a window of opportunity for recovery

As we enter August 2026, the global capital market is approaching a significant expected turning point. The US Consumer Price Index (CPI) for July showed a slight year-on-year decline, with core inflation remaining moderate. Market bets on the Federal Reserve's continued interest rate hikes have rapidly cooled down, and the US dollar index has weakened amidst fluctuations, directly driving a recovery in risk appetite for global risk assets. Marginal changes in the liquidity environment are reshaping the operational rhythm of major financial markets both domestically and internationally.

From the perspective of overseas markets, inflation data is the core trigger for this round of expectation switching. Under the continuous suppression of high interest rates for several months, consumer demand in the United States has gradually slowed down, and the upward pressure on prices has eased to some extent. Funds are expected to start trading at a 'policy turning point', with US bond yields falling from high levels and major US stock indices maintaining a volatile upward trend. At the same time, the geopolitical situation has eased marginally, international crude oil prices have rebounded, commodity differentiation is evident, and precious metals have benefited from the continuous strengthening of real interest rates.

The liquidity transmission chain is extending to emerging markets. Against the backdrop of the weakening of the US dollar, the exchange rate of the Chinese yuan has gained support, and the central parity rate of the Chinese yuan has continued to steadily adjust recently. The environment for cross-border capital flows has continued to improve. The fluctuation of northbound funds has decreased, and the net inflow trend has reappeared in stages. Foreign capital has begun to re evaluate the valuation and cost-effectiveness of domestic assets. For A-shares, the easing of external liquidity pressure is undoubtedly an important favorable condition.

Looking at the domestic market, monetary policy maintains a moderately loose tone. The central bank continues to use tools such as reverse repurchase to stabilize the short-term funding situation in the market, ensure reasonable and sufficient liquidity, and continue to guide the downward trend of financing costs for the real economy. At the policy level, we continue to focus on expanding domestic demand, supporting high-end manufacturing, digital economy, and technological innovation industries, and continuously releasing positive news at the industry level. In terms of market style, funds exhibit obvious structural characteristics, with growth tracks such as computing power, semiconductors, and high-end manufacturing receiving continuous attention from funds, and high dividend sectors maintaining resilience as the main defense line.

However, market recovery is not a one-sided trend, and multiple uncertainties still exist. On the one hand, there are still variables in the pace of overseas monetary policy adjustments, and if inflation rebounds again, it may once again disrupt the global capital market; On the other hand, the domestic economic recovery is a gradual process, and market sentiment is easily affected by short-term data fluctuations. After a round of price increases, some thematic sectors have seen their valuations rise, leading to profit taking pressure. Investors should not blindly chase after higher prices.

Institutions generally believe that the current market is in a period of volatile recovery, and the overall environment has improved compared to the second quarter. However, the conditions for a comprehensive bull market are not yet met, and the investment focus is still on structural opportunities. In terms of asset allocation, it is recommended to have a balanced layout, taking into account the certainty of growth track performance and the stability of defensive assets. At the same time, good position management should be done to avoid pure concept speculation targets.

Overall, global liquidity expectations have entered an important window of transformation, with the marginal weakening of external constraints coupled with domestic policy support, and the continuous optimization of the A-share market operating environment. The trend of the capital market ultimately depends on the continuous improvement of fundamentals. Investors should rationally view short-term fluctuations and base their layout on medium - and long-term industrial trends.