East Money Information's Chen Guo team released a research report indicating that earlier warnings about rising U.S. bond yields and the imminent Bank of Japan rate hike suggested external market disturbances. Last week's market performance showed that while A-shares experienced some volatility, incremental capital was eager to front-run the spring market rally, with domestic demand sectors—particularly non-durable consumer goods—clearly outperforming.
The spring market rally, after a prolonged period of high success rates, has transitioned from calendar effects through front-running games into a reflexive phase. Beyond potential January earnings preview disruptions, visibility of negative factors remains low, suggesting investors should follow the front-running trend and position on dips.
Sectors with attractive risk-reward ratios and improving success probabilities—particularly domestic demand—should be prioritized. Key focuses include: insurance, securities, non-ferrous metals, AI computing/semiconductors, retail/beauty care/social services/dairy, aviation, new energy, and innovative drugs.
**Evolution of the Spring Market Rally** With shifts in market participant structures, faster information dissemination, enhanced investor learning effects, and economic transformation, the spring market rally has evolved through three distinct phases: 1. **2017 and earlier (Calendar Effect Phase)**: The rally typically emerged post-Lunar New Year, driven by policy support and liquidity inflows. 2. **2018–2023 (Front-Running Game Phase)**: The rally’s start shifted to December due to learning effects and structural changes in market participation. 3. **2024–2025 (Reflexive Phase)**: Front-running depletes incremental capital, making markets vulnerable to "deep corrections" on negative shocks, with subsequent reliance on industrial trends and liquidity drivers.
**Positioning Strategy: Follow Front-Running, Buy on Dips** Recent U.S. CPI data has significantly reduced hurdles for rate cuts, while the Bank of Japan’s hike is already priced in. Domestic policies boosting demand and countering involution, alongside a strengthening RMB, leave few visible near-term headwinds beyond January earnings previews. Insurance funds and private equity are already front-running, with margin balances rising. Drawing from the 2024–2025 third-phase experience, markets are likely to trend upward with volatility, making dips—even sharp ones—potential entry points.
**Domestic Demand’s Role in the Spring Rally** Policy catalysts and safety margins suggest multiple domestic demand sectors may sustain participation in the spring rally. Historically, top-performing sectors late in the year often see pullbacks early the next year, while laggards rebound due to year-end profit-taking, fund rebalancing, and policy expectations. Over the medium term, gradual RMB appreciation and pro-consumption policies from the Central Economic Work Conference could revitalize domestic demand and economic restructuring. Thus, select domestic demand sectors may offer continuity, warranting increased attention.
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