Cinda: The current market style diffusion is still in the valuation, expectation, and capital-driven stage.

Cinda released a research report stating that in the past two months, value investing style has significantly strengthened and spread, with finance, cyclical, and consumer sectors taking turns in performance. The main reason is that around the year-end, there is a lack of high-frequency quarterly earnings reports to prove performance of the sectors, therefore most of the volatility comes from valuation and expectations. The current market's style spread is still driven by valuation, expectations, and fund flows, and this phase may last at least 1-2 quarters. However, for the style spread to convert into an annual bull market, the realization of earnings logic for value stocks is needed. Before that, the technology sector with stronger long-term industry logic may return. Cinda's main points are as follows: In the second half of 2014, there was a liquidity bull market, with style shifting from TMT to value, cyclical, stable, and finance sectors taking turns in strength, but the duration of this trend was short. The catalyst for the style spread in the second half of 2014 was the national strategic policies like "Belt and Road" and the reduction in reserve requirement ratio and interest rates. However, the core reason behind this was that after incremental funds flowed in, there were fewer growth directions with consistently strong performance, and after a significant increase in growth stocks' valuation in 2013, they had reached relatively high levels. Relying solely on a single industry was difficult to drive a high short-term index increase. However, the rally in financial stocks in Q4 of 2014 was short-lived, and the main market theme returned to TMT in 2015. This was because the second decline in demand during the overcapacity cycle from 2011 to 2015 lasted until the end of 2015. In 2015, value stocks did not show a turning point in profitability. In the second half of 2016, there was a slow bull market, with style spreading from growth and cyclical to consumer and finance sectors. Value stocks remained dominant for nearly two years. 2016 was a relatively strong volatile market, with the first half of the year leaning towards cyclical themes, and the second half seeing weaker performance in growth stocks, with consumer, finance, and cyclical sectors taking turns in performance. Leading indicators such as PMI and credit began to stabilize and rise in Q1-Q2 of 2016, and in Q3-Q4, most economic-related industries began to show signs of recovery. This style spread benefited value stocks from economic stabilization and performance validation, creating an annual bull market. The current style spread is still in the phase driven by valuation, expectations, and fund flows, and may last at least 1-2 quarters. However, for the style spread to convert into an annual bull market, the realization of earnings logic for value stocks is needed. There is hope for positive changes in demand next year, bringing about a turning point in the production capacity cycle, a normalization of price data, and an economic recovery at some point. Before that, in the late stage of the liquidity bull market, the technology sector with stronger long-term industry logic may return. Risk factors include unexpected declines in the real estate market, severe fluctuations in the US stock market, and the possibility of historical patterns becoming ineffective.