Can the high growth momentum of growth-style investments break free from constraints posed by global macroeconomic uncertainties?
Since the easing of U.S.-Iran-Israel tensions in April, global growth-style technology stocks have surged in sync to new highs. From March onward, the conflict became a key factor influencing global asset pricing, with rising oil prices and supply chain disruptions sparking stagflation concerns. Expectations for Federal Reserve rate cuts within the year were also pushed back, leading to a significant decline in global risk assets in March. However, as both the U.S. and Iran signaled negotiations in early April and announced a temporary ceasefire on April 8, global risk assets rebounded rapidly. Major global indices representing growth stocks, such as the Nasdaq Composite Index in the U.S., the ChiNext Index in China, and the KOSPI in South Korea, quickly reached new highs. Notably, the Philadelphia Semiconductor Index surged 38.6% in April (as of April 24), potentially marking its largest monthly gain since February 2000.
High growth momentum is key for growth-style stocks to withstand global macroeconomic uncertainties. Many investors are puzzled by the fact that despite lingering uncertainties in the U.S.-Iran-Israel conflict, restricted maritime passage keeping oil prices elevated, and stagflation risks remaining higher than pre-conflict levels, major global and Chinese growth indices have rallied to new highs amid seemingly unfavorable macroeconomic conditions. A report published in April 2025, titled "How to Identify Growth Stock Trends?", highlighted that the decisive factors for growth-style performance lie in robust industry trends and earnings realization, which often outweigh other factors such as macroeconomic conditions, valuations, and capital flows. If the upward trend in growth momentum is clear, earnings growth can potentially offset rising interest rates and risk premiums. The recent rally in growth stocks is largely driven by breakthroughs in AI since March. Although Middle East tensions initially suppressed this growth-driven trading, the reduction in tail risks has allowed growth-oriented trades to regain dominance.
This report also reviews historical cases where growth stocks outperformed during periods of global macroeconomic uncertainty, providing insights for current market trends and allocation strategies.
Historical instances show growth stocks repeatedly achieving independent performance amid global macroeconomic uncertainties.
The analysis examines cases where growth sectors outperformed during weak macroeconomic environments, highlighting major technological breakthroughs over the past 50 years and their impact on capital markets.
► Late 1970s: Computer revolution drove Nasdaq gains during U.S. stagflation.
The U.S. experienced stagflation in the 1970s, with poor overall stock market performance. The economy faced slowing growth, high inflation, and rising unemployment, compounded by two oil crises in 1973 and 1978. As a result, U.S. CPI growth saw two surges, peaking at 12.2% and 14.6%, with multiple quarters of negative GDP growth and unemployment reaching 11.8% by November 1982. The stock market recorded its worst performance since the Great Depression, with the Dow Jones Industrial Average stagnating for 17 years from 1965 to 1981 and valuations declining over 60%.
Meanwhile, breakthroughs in microelectronics and the advent of personal computers propelled the Nasdaq significantly higher. Despite overall poor market performance, the Nasdaq entered a long-term bull market after inflation was initially curbed in late 1974. From late 1974 to 1981, the Nasdaq surged over 300%, even rising during the second oil crisis in 1978, while the S&P 500 and Dow Jones gained only 100% and 70%, respectively. U.S. tech stocks outperformed amid stagflation, driven by commercial breakthroughs in microelectronics. Key milestones included Intel's launch of the first commercial microprocessor, the Intel 4004, in 1971; Nasdaq listings of Intel and AMD in 1971 and 1972; the founding of Microsoft in 1975; and Apple's establishment in 1976, followed by the successful Apple II in 1977. These innovations transformed computers from expensive, large-scale institutional tools to personal and household devices, rapidly expanding the market. This high-certainty industry trend led to exponential growth in U.S. microcomputer sales and a 150% increase in semiconductor sales from 1976 to 1981, enabling tech stocks to outperform despite stagflation.
► 2013: Mobile internet wave drove ChiNext gains during China's economic restructuring.
In 2013, China's macroeconomic liquidity tightened, leading to subdued overall stock market performance. However, the mobile internet industry trend propelled growth sectors to outperform. The economy showed weak recovery, with PPI remaining negative due to overcapacity in energy and raw materials, and macroeconomic liquidity was relatively tight throughout the year. Externally, the Fed signaled tapering of quantitative easing in May 2013; domestically, the central bank maintained tight monetary policies, pushing the 10-year government bond yield from 3.6% to a historic high of 4.6% by year-end. While major indices were flat, the ChiNext Index rose 82.7% against the trend. Sectors like media, computers, electronics, and communications led gains. The ChiNext's strength stemmed from the rapid development of mobile internet following smartphone普及. By late 2012, smartphone penetration in China exceeded 50%, and the transition from 3G to 4G accelerated mobile internet growth. High growth momentum in the electronics产业链 spread from hardware to applications. Mobile internet data traffic growth entered an upward cycle in 2013, film box office growth rebounded to over 40%, mobile internet users increased 19.1%, mobile gamers surged 192.1%, and online shopping users grew 24.7%. Against this industry trend, earnings in electronics, media, computers, and communications began improving from cyclical lows. Coupled with a new cycle of mergers and acquisitions, the ChiNext entered an earnings improvement cycle ahead of traditional sectors, achieving independent performance despite tight liquidity.
► 2023-2024: AI industry trend surged during Fed rate hikes, diverging U.S.-China growth stock performance.
The Nasdaq performed strongly amid high U.S. interest rates. The Fed began raising rates in 2022, lifting the federal funds rate from zero to 5.25-5.50% by July 2023 and maintaining high levels until rate cuts resumed in September 2024. The 10-year Treasury yield averaged 4% in 2023-2024, briefly spiking to 5% in October 2023. Despite this, U.S. stocks performed well, with the Nasdaq rising about 70% from 2023 to August 2024.
The generative AI trend in 2023 helped U.S. growth stocks decouple from macroeconomic pressures; Chinese growth stocks gained strength after 2024. Despite high global financing costs, AI advancements were a key breakthrough. OpenAI's ChatGPT launch in November 2022 commercialized generative AI. As industry directions clarified, computing demand surged, data center construction accelerated, and tech giants increased AI capital expenditures. In 2024, four major cloud providers (Amazon, Google, Microsoft, Meta) combined capex reached $250.3 billion, up 62.6% year-on-year. Driven by demand, chipmakers like NVIDIA saw robust earnings, with revenue up 125.9% and net profit up 581.3% in 2024. Consequently, the Nasdaq rose 43% in 2023 and hit new highs before 2024 rate cuts. In contrast, Chinese AI lacked breakthroughs initially, and A-share tech stocks underperformed. However, policy shifts in September 2024 and DeepSeek-R1's launch in early 2025 revitalized China's innovation narrative, boosting A-shares, especially tech stocks. This again underscores the importance of high industry growth and earnings realization for growth-style performance.
In summary, even amid significant macroeconomic uncertainties (e.g., rising inflation, weak growth, tight liquidity), if tail risks are low, high-growth industry trends coupled with earnings realization can enable sectors to achieve independent performance. Conversely, if growth momentum wanes, growth stocks may underperform even with loose liquidity.
How to identify growth stock trends?
The report "How to Identify Growth Stock Trends?" argues that while fluctuations may occur due to valuations or macro conditions, fundamental changes in industry trends are key to trend reversals. However, identifying such changes is challenging, as stock prices may react early. Forward-looking indicators include: 1) Slowing industry penetration growth. For example, global smartphone penetration reached 20% in 2010; while penetration continued rising, Chinese consumer electronics stocks peaked by end-2010. Post-2013, the trend shifted to applications, with electronics underperforming media and computers despite ongoing smartphone upgrades. New energy vehicle penetration began rising in 2020, exceeding 20% by mid-2022; though penetration continued, growth slowed, and stock peaks generally occurred from late 2021 to mid-2022. 2) Second-order changes in earnings growth. Another indicator is the inflection point in profit growth acceleration. Typical growth trends see valuation expansion first, followed by earnings growth消化高 valuations. Stock peaks often align with changes in earnings growth trends. For instance, during 2021-2022, sectors like batteries, solar, energy metals, and semiconductors saw index peaks near earnings growth inflection points.
Liquidity and valuations are not decisive factors; they may cause short-term fluctuations but not alter medium-term trends. Specifically: 1) High trading crowding may lead to temporary adjustments, but medium-term trends can persist. For example, the ChiNext saw turnover rate declines and oscillations in 2013-2014 and 2020-2021, but trends continued driven by industry momentum. Crowding metrics based on sector trading share also have limited predictive power. 2) High mutual fund concentration reflects chasing high growth, not causing peaks. Recent concerns about fund crowding in tech are seen as a fifth "grouping" cycle, but this is a result of pursuing growth,符合市场规律. Grouping itself doesn't determine peaks, and no absolute threshold exists historically. Risks arise if funds become the main incremental capital source, passively reinforcing grouping. 3) Elevated valuations may increase sensitivity to liquidity or news shocks, but if industry trends persist, earnings growth can消化valuations. For example, battery sector P/E TTM exceeded 125x in late 2020, but 1Q21 earnings surged over 250% year-on-year, supporting the trend until end-2021. Thus, if industry trends, growth momentum, and earnings remain intact, temporary adjustments from other factors may present opportunities.
Outlook: Trend growth + cyclical opportunities.
The recent strength in growth styles, exemplified by the ChiNext Index, stems from high earnings growth momentum. Since the March conflict, global macroeconomic uncertainties have risen, with higher oil prices increasing inflation risks and Fed cut thresholds—not typically favorable for growth styles. However, new highs in the Nasdaq and ChiNext are attributed to AI growth momentum offsetting negative factors. Early this year, open-source AI agent framework OpenClaw gained traction, enabling natural language system operations and automation, shifting AI from general dialogue to practical tools. GitHub Stars grew from 7,900 on January 25 to over 364,000 by April 26, with major firms accelerating AI agent deployments, boosting user awareness and commercial viability. Meanwhile, AI giants expanded capex for computing, with global semiconductor sales growth rising to 61.7% in February, a 40-year high, further accelerating the cycle. Domestically, high energy storage demand and energy transition expectations driven by oil prices also supported sectors like storage batteries. As geopolitical tensions eased, growth-driven trading regained dominance.
Future focus remains on growth momentum tracking. Key monitors include capex expectations for U.S. leaders, global semiconductor sales cycles, second-order changes in core sector earnings growth, and penetration rate slowdowns. Regarding fund crowding, active mutual funds aren't the main incremental capital source this round; surges in AI-related sectors may involve broader market inflows. High fund holdings in communications and semiconductors relate partly to sector outperformance rather than concentrated inflows alone.
Maintain focus on growth and cyclical improvements. The "A-Share Market 2026 Outlook: Advancing with Momentum" suggests growth retains advantages in 2026, but relative outperformance may narrow. After three years of capacity reduction and policies like "anti-involution," more cyclical sectors may benefit from supply-demand rebalancing. Key themes: 1) Growth: AI leader capex remains strong; focus on infrastructure like optical communications, semiconductors. Energy storage, biotech also warrant attention. 2) Cyclicals: Consider geopolitics, potential oil price increases, and capacity cycles; monitor chemicals, energy metals, oil services, and shipping supported by tight supply-demand, and export-benefiting sectors like grid equipment, machinery, and commercial vehicles.
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