Shenwan Hongyuan Group: The biggest impact of the US-Iran conflict has passed, and the market bottom and growth style bottom have been synchronously established.

Shenwan Hongyuan Group released a research report stating that it is reasonable for the US-Iran standoff to have some fluctuations. The expected duration of the US-Iran standoff has been extended, and the market has already been priced in. The mid-term macro situation has basically converged, and the US-Iran conflict as the main contradiction in asset pricing (also the largest wave of impact) is coming to an end. Subsequent fluctuations are inevitable, but the negative impact may weaken wave by wave. Reaffirming the market bottom of this round, which is also a bottom for small-cap growth stocks. The pattern of the "two-stage bull market" is returning. The main points from Shenwan Hongyuan Group are as follows: 1. It is reasonable for there to be some fluctuations in the US-Iran standoff. The market has already priced in the extended duration of the US-Iran standoff. The mid-term macro situation has basically converged, and the US-Iran conflict as the main contradiction in asset pricing (also the largest wave of impact) is coming to an end. Subsequent fluctuations are inevitable, but the negative impact may weaken wave by wave. Before the US-Iran return to the negotiating table, they are still engaging in intense negotiations. It is reasonable for there to be some fluctuations in the US-Iran standoff, and the market's expectations for it are limited. The three key mid-term macro convergence points are reaffirmed: 1. The US-Iran standoff will be a long-term issue, and consensus has been reached on this. Corresponding changes in the central pricing of assets have already been seen. 2. The mid-term was not a stagnation to begin with, and with the US-Iran returning to the negotiating table, the risk of stagnation is further eliminated. The overall weakness of the US job market and its K-shaped differentiation indicate that the US economy "is easy to stagnate, not easy to inflate." The Washington monetary policy needs to balance dealing with inflation, supporting employment, and promoting the return of manufacturing. Monetary policy will be cautious in a stagflation-like stage and is likely to cut interest rates in the event of a recession-like stage. The macro combination that is unfavorable for the capital market includes "poor overseas economy + policy tightening", which at present seems to be a low probability. If "loose policy to deal with recession" is enacted, it will be beneficial for the continuation of the structural market rally in the capital market, making the macro situation not the main contradiction. The historical experience of the Russia-Ukraine conflict is of a rapid downturn followed by a rebound, and then a slow decline phase follows. The driving force for the gradual decline is a macro environment similar to stagflation. The probability of stagflation occurring in this round is low, corresponding to "the moment when the US-Iran conflict has the greatest impact on the capital market." Subsequent fluctuations are still possible, with the impact potentially weakening wave by wave. 3. After the US-Iran negotiating initiatives, the boundaries of the mid-term macro situation are gradually becoming clear. The crucial convergence is being confirmed, and the stage of the US-Iran conflict as the main contradiction in asset pricing is coming to an end. Thus, the previous low point may be the market bottom of this round. 2. Reaffirming the market bottom of this round, which is also a bottom for small-cap growth stocks. The pattern of the "two-stage bull market" is returning: 1. The market seems to have forgotten the core characteristic of the "first-stage bull market" which was dominated from the bottom up. Macro issues from the top down are not always the main contradiction, and with the US-Iran conflict phase as the main contradiction passing, the effectiveness of selecting structures from the bottom up will return, and the market's profit-making effect will have a slow restart. 2. The original mid-term pattern was a period of oscillation consolidation between structural growth and comprehensive growth. After the oversold rebound, the market may return to a period of consolidation, and the resistance in the market may temporarily increase. Shenwan Hongyuan Group still considers the current period to be a period of oscillation consolidation in the middle of the "two-stage bull market." The core of this phase is the digestion of part of the valuation of earnings, and a pullback to digest another part of the valuation. Can the current earnings digestion support the valuation? Even under a somewhat pessimistic macro assumption (stagflation assumption with significant cost impact), the net profit growth of A shares will still be positive in 2026 (Shenwan Hongyuan Group's forecast is 6.2%). The main influencing factor is the impact of cost increases on corporate profits, but the cost impact is a gradual process. Historically, the year-on-year change in the Producer Price Index (PPI) goes through three stages from negative to positive, central rise, and peak, often corresponding to three stages of cost increases. Therefore, in 2026, only the first stage of cost increase is possible. With supply clearing and improved profitability stability, positive growth in 2026 is still highly likely. At the same time, as cost pressures ease, there is room for the US-Iran conflict to ease. Combining pessimistic earnings forecasts with the PE valuation returning to the historical median by the end of 2026 (the first target after the adjustment phase following the first stage of the bull market, where valuations fell), the market is positioned to clear out early pessimistic expectations, not far from the previous low. Combining the convergence of the mid-term macro situation with policy stability guarding the stability of the Chinese capital market, the previous low point can be completely considered as the "market bottom" of this round. Furthermore, it is emphasized that this round of the "market bottom" is also a "bottom for small-cap growth stocks." Overseas, the value style has been outperforming growth since November 25th. In January 26, after the emergence of computing power inflation, commercial aerospace, and AI application rallies domestically, there has also been a correction in small-cap growth. Both domestically and internationally, the evolution of the market process is basically the same, starting from rotations in natural sectors and shifts in style, going through HALO trading and the US-Iran conflict, the small-cap growth style is currently in a relatively high cost-effective status. Once the moment when geopolitical conflicts have the greatest impact on the capital market passes, the macro cycle and geopolitical conflict are no longer the main contradiction, and the previous mid-term pattern is gradually returning. New economy and strategic resources are still assets of the times with inflation. The effectiveness of bottom-up stock selection will gradually return, the profit-making effect will stabilize, and a new upward phase will slowly start. Therefore, the "market bottom" is also a "style bottom" for small-cap growth stocks. Subsequent to this, the "two-stage bull market" will gradually return, and at this stage, two points are noted: 1. During the phase when the US-Iran conflict dominated asset pricing, the market seems to have forgotten the core characteristic of the "first-stage bull market" dominated from the bottom up. And the top-down macro issues are not always the main contradiction, with the phase of the US-Iran conflict as the main contradiction passing, the effectiveness of selecting structures from the bottom up will return, and the profit-making effect in the market will slowly pick up. 2. The period of oscillation and consolidation that follows the "first-stage bull market" will continue for some time. This week's oversold rebound will have a comprehensive rise, but as the market may return to the core oscillation zone, there will be an increase in resistance in the market, and the process of structural differentiation. 3. Structural recommendations remain unchanged: during the period of oscillation and consolidation in the middle of the "two-stage bull market", the extension of the technology theme + expansion of the macro narrative continue to be the main sources of high elasticity investment opportunities. In this phase, independent opportunities in segmented industries still exist, but sector correlations are weak, and the profit-making effect is difficult to spread widely. The technology-focused direction of the market that was strong before the US-Iran conflict is still viable in the short term, with a focus on optical communications, gas turbines, and energy storage. In the next stage, the investments in new energy, new energy vehicles, and the export chain are directions that can verify improvements in business conditions, although buying into these sectors for hedging purposes may not be effective in the short term, investing in these sectors for their growth prospects remains an important opportunity. During the period of oscillation and consolidation, high elasticity investment opportunities still come from the extension of the technology theme + expansion of the macro narrative. Independent trends in segmented industries are still present, but with weak sector correlations, the profit-making effect is difficult to spread widely, and there is a need to switch directions in a few economically favorable trends. During high-risk aversion stages in the face of the US-Iran conflict, high elasticity investment opportunities are generally suppressed. However, as the US-Iran conflict's greatest impact on the capital market passes, the effective sector rotation of high-elasticity sectors remains effective. In terms of specific directions, the technology-focused direction that was strong before the US-Iran conflict, still has short-term elasticity. The focus should be on optical communications, gas turbines, and energy storage. In the subsequent rotation, a focus on investments in new energy, new energy vehicles, and the export chain is recommended. In times of low risk aversion, new energy is seen as a hedge asset; however, its effectiveness may be limited in the short term. As orders increase, supply and demand improve, and the ability to export to achieve higher prices effectively improves, the market will enter an investment stage based on business conditions, where investments in new energy, new energy vehicles, and the export chain continue to be important. Additionally, new energy may become a basis for the reevaluation of relative strengths between countries for foreign capital inflows, making it a direction with upward elasticity and a spread of profit-making effects. Risk warning: Overseas economic recession exceeding expectations, and domestic economic recovery falling short of expectations.