Last week, the A-share market displayed a structured divergence pattern, with cyclical and financial sectors leading the gains, while military industry and power equipment sectors turned downward. By industry, petroleum & petrochemicals, coal, and non-ferrous metals continued their upward trend month-over-month; communications strengthened sequentially; whereas military industry, power equipment, automobiles, and computers were among the top decliners.
From a macro perspective, the Fed paused on rate cuts in January, but cuts may still materialize within the year. Domestically, the January Manufacturing PMI retreated during the off-season, suggesting macro policies may become more proactive and assertive. The January manufacturing PMI registered 49.3%, a decrease of 0.8 percentage points from the previous month, falling short of the average level seen in recent years for the same period, with a decline stronger than seasonal patterns. Furthermore, influenced by rising commodity prices, price indices showed a significant rebound; service sector景气 remained stable, while activity in the construction sector still requires policy support. Looking ahead to 2026, the Ministry of Finance has indicated it will ensure overall expenditure intensity "only increases, does not decrease" and key area guarantees are "only stronger, not weaker," forecasting that macro policies will be more proactive to support aggregate demand.
Overseas, on January 30th local time, Trump nominated former Federal Reserve Governor Kevin Warsh to serve as the next Fed Chair, succeeding incumbent Chair Jerome Powell. Warsh advocates for "rate cuts + balance sheet reduction," believing the Fed needs to be accountable for inflation, and that the post-crisis continuous QE was a primary cause of inflation. Therefore, he proposes using QT (Quantitative Tightening) to control inflation, arguing that once inflation risks and policy distortions are corrected, room for rate cuts can be created—a approach Warsh terms "practical monetarism."
This "practical monetarism" both signals the Fed's determination to control inflation to the market and caters to Trump's desire for rate cuts, aiming to correct market distortions caused by excessive QE.
Additionally, the Fed's January FOMC meeting maintained the status quo, largely aligning with market expectations. The Fed expressed more optimistic views on the economy, employment, and inflation, significantly increasing uncertainty about the timing of resumed rate cuts. We believe the Fed chair transition and potential compromise to Fed independence could cause substantial disturbances to monetary policy, but these are likely short-term in nature. Rate cuts are still anticipated in 2026; US Treasury yields may experience high volatility in the short term, potentially declining before rising again, while US stocks are expected to find support after near-term fluctuations.
Regarding investment strategy, the market may tend towards stabilization; focus on niche leaders and the A500 index. Currently, the disclosure of 2025 financial results for A-share listed companies has entered a密集 window period. The fourth quarter of 2025 exhibited characteristics of a rising growth trajectory for the new economy and a diffusion of景气 clues: economic transformation accelerated in Q4, and although the structural divergence between old and new economy景气 persisted, the景气 level of the new economy明显上移, spreading from AI to more areas like出海, resource products, and service consumption. AI and出海 continue to drive the景气 level of emerging technologies higher, while most cyclical sectors benefit from supply constraints and price increases driven by downstream demand transformation. Attention can be paid to low-congestion, lagging sectors with upward revisions to profit expectations, such as electronics/出海 manufacturing/insurance.
Current trading regulations have significantly suppressed short-term speculative sentiment. Subsequently, the scale of ETF redemptions is expected to narrow, and the market may stabilize. External disturbances are highly likely to bring correction pressure to previously hot sectors, thereby creating adjustment pressure on the indices. Following expected cooling pressure on the indices, policy funds are expected to shift from previous selling actions to a supportive stance. Previously high-pressure areas like the沪深300 might be worth monitoring as potential rotation targets.
For investment direction, emerging technology remains the main theme, but value stocks also have their spring; key focus should be on niche leaders and the A500 index. Specifics include: 1) Tech growth direction: Global demand for AI computing power remains in a robust upward phase, driving rapid growth in semiconductor equipment demand and a wave of price increases across the entire industry chain. Focus can be placed on Hong Kong-listed internet stocks/electronics & semiconductors/communications/military industry, as well as manufacturing出海 with global competitive advantages (e.g., power equipment/machinery equipment/automobiles and parts), but short-term情绪 pressure needs attention. 2) Cyclical direction: Valuations and positioning are at low levels, with景气 showing marginal improvement at the bottom, benefiting from policies aimed at expanding domestic demand. Attention can be paid to food/retail/tourism services/hotels, as well as cyclical commodities experiencing price increases due to long-term global instability and declining US dollar credibility, such as crude oil/non-ferrous metals/chemicals, which can be considered on dips.
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