1. Report Industry Investment Rating There is no information about the report industry investment rating in the provided content. 2. Core Viewpoints of the Report - The anti - involution campaign, initiated by the Central Financial and Economic Affairs Commission, is a 10 - year recurrence of the Juglar cycle. It is expected to have a profound impact on China's economy, with effects surpassing the previous supply - side reform [1][13][16]. - The anti - involution drive rapidly boosts commodity prices, which is the third and final wave of the current Kitchin cycle's upward phase, likely to last until the end of the year [2][17]. - It has a positive impact on listed companies' performance and stock prices. The A - share market shows a wealth effect, attracting more off - market funds [2][24]. - The Fed is likely to resume rate cuts in September 2025 and enter a steep rate - cut phase in 2026. This will narrow the Sino - US interest rate gap, prompting the accelerated return of China's overseas funds [2]. - Global professional investment institutions are reducing their exposure to US assets and increasing their allocation to Chinese assets [2][28][30]. - Gold is in a technical adjustment, and a major opportunity may emerge at the end of the year [2][4][31]. - The anti - involution campaign initiates an upward trend in inflation, opening up downward space for long - term treasury bonds [3][35]. - China is expected to achieve a double surplus in trade and capital, and the offshore RMB exchange rate is likely to strengthen [3][38]. 3. Summary According to the Directory 3.1 Four Economic Cycles - **Kitchin Cycle**: A short - term economic cycle of about 3.5 years. The current upward phase of the Chinese Kitchin cycle started in June 2023 and is expected to peak at the end of 2025, while the US cycle will peak in Q1 2026 [7]. - **Juglar Cycle**: A medium - term cycle of 9 - 10 years, also known as the manufacturing investment cycle. China's current Juglar cycle is in the upward phase and is expected to peak in early 2027 [8]. - **Kuznets Cycle**: An economic cycle related to the housing construction industry with an average length of about 20 years. The current Chinese Kuznets cycle is expected to bottom out around 2030 [9]. - **Kondratieff Cycle**: A long - term cycle of 50 - 60 years, also called the technological innovation cycle. The current Kondratieff depression started in 2020 due to the COVID - 19 shock, is expected to end around 2030, and then enter a 10 - year recovery phase. China is the center of the current technological innovation cycle, with AI and AI humanoid robots as the representative innovations [10]. 3.2 Anti - Involution Campaign - **Campaign Initiation**: On July 1, the Central Financial and Economic Affairs Commission meeting called for in - depth construction of a unified national market, focusing on "five unifications and one opening". Subsequently, various industries carried out anti - involution measures [11]. - **Policy Response to the Juglar Cycle**: It is a response to the manufacturing investment cycle reaching its peak. Similar to the supply - side reform 10 years ago, its goal is to reduce overcapacity, but this time it focuses on emerging industries and the service sector [13][15][16]. - **Differences from the Previous Supply - Side Reform**: It focuses on emerging industries and the service sector, and is expected to have a more far - reaching impact on the Chinese economy [16]. 3.3 Impact on Asset Classes - **Commodities**: The anti - involution campaign drives up commodity prices, which is the third wave of the current Kitchin cycle's upward phase. Prices are expected to rise until the end of the year. After a second - wave correction in late July, they are likely to enter the main upward wave in late August [17][21][23]. - **Equities**: The A - share market shows a wealth effect, attracting off - market funds. The decline at the end of July was a pull - back after breaking through the 3,500 - point platform. The CSI 300 index will have more upward momentum, and the CSI 1000 and CSI 500 indexes are expected to rise more strongly [24][39]. - **Gold**: Gold is in a technical adjustment, and a major opportunity may emerge at the end of 2025 [31][39]. - **Bonds**: The anti - involution campaign initiates inflation, opening up downward space for long - term treasury bonds [35][39]. - **Foreign Exchange**: China is expected to achieve a double surplus in trade and capital, and the offshore RMB is likely to strengthen [38][39].

Group 1: US Stock Market Analysis - The report suggests that the current rebound in the US stock market may be forming a large double top, indicating a potential end to the rally [1][19][25] - From a cyclical perspective, the S&P 500 and Nasdaq 100 are in a downward phase similar to the period around 2008, suggesting comparable risks [1][19][21] - The valuation perspective shows that as of May 16, 2025, the difference between the US 10-year Treasury yield and the inverse of the S&P 500 P/E ratio has risen to 0.68%, indicating lower investment attractiveness in US equities compared to bonds [1][35][37] Group 2: A-Share Market Performance - The A-share market showed a preference for value styles, with strong performances in financial and consumer sectors [2][10][11] - The report highlights that various ETFs, particularly large-cap and value ETFs, outperformed during the week, while TMT-related sectors have not fully recovered from previous lows [2][10][11] - The analysis of industry indices since early April indicates that sectors like retail, banking, and agriculture have recovered well, while technology sectors still have room for recovery [2][10][11] Group 3: Genetic Programming Industry Rotation Model - The genetic programming industry rotation model has achieved an absolute return of 14.64% this year, outperforming the industry equal-weight benchmark by 13.79 percentage points [3][39][40] - The model currently favors sectors such as computers, electronics, machinery, media, and home appliances, while excluding telecommunications [3][39][40] - The model's strategy balances TMT-related growth sectors with traditional industries and consumer-related sectors to maintain a diversified portfolio [3][39][40] Group 4: Absolute Return ETF Simulation - The absolute return ETF simulation portfolio has seen a slight decline of 0.05% last week but has accumulated a total return of 3.70% year-to-date [4][43][44] - The portfolio's asset allocation is based on recent trends, with a balanced focus on resource sectors like steel and non-bank financials, alongside technology sectors [4][43][44] - The current holdings include energy and soybean ETFs, while gold ETFs have been excluded [4][43][44] Group 5: Global Asset Allocation - The global asset allocation simulation currently favors bonds and foreign exchange, with a predicted ranking of future returns showing bonds at the top [47][48] - The simulation has recorded an annualized return of 7.29% with a Sharpe ratio of 1.50, although it has faced a decline of 3.64% year-to-date [47][48] - The strategy emphasizes a higher risk budget for assets such as Chinese and US bonds [47][48]

Quantitative Models and Construction Methods - **Model Name**: Huatai Three-Cycle Model **Model Construction Idea**: The model analyzes the price movement of COMEX gold settlement prices using three classic economic cycles: Kitchin, Juglar, and Kuznets cycles. It identifies the dominant cycle components influencing gold price trends[17] **Model Construction Process**: 1. The model decomposes the year-on-year sequence of COMEX gold settlement prices into three cycle components: Kitchin, Juglar, and Kuznets cycles 2. The amplitude of the extracted cycle components is ranked as Kuznets > Juglar > Kitchin 3. The current positions of the Kuznets and Juglar cycles are analyzed to predict future gold price trends[17][19] **Model Evaluation**: The model highlights that gold prices are more influenced by longer-term cycles (Kuznets and Juglar) compared to shorter-term cycles (Kitchin), providing insights into the strong cyclical positioning of gold in the current market[17] Model Backtesting Results - **Huatai Three-Cycle Model**: The model indicates that the Kuznets cycle is near its peak, and the Juglar cycle is in an upward phase, suggesting that gold prices are likely to remain strong in the near term[17][19] Quantitative Factors and Construction Methods - **Factor Name**: Gold as a Portfolio Stabilizer **Factor Construction Idea**: Gold is evaluated as a low-correlation asset with high long-term returns, making it a potential stabilizer in diversified investment portfolios[3][21] **Factor Construction Process**: 1. Historical performance of gold is compared with other major asset classes (e.g., equities, bonds, commodities) over different time horizons (1 year, 5 years, 10 years, 20 years) 2. Risk-return metrics such as Sharpe ratio, Calmar ratio, and maximum drawdown are calculated for gold and other assets 3. Correlation analysis is conducted to assess gold's relationship with other asset classes[21][23][24] **Factor Evaluation**: Gold demonstrates high returns, low volatility, and low correlation with other assets, making it a valuable addition to investment portfolios for risk diversification and return enhancement[21][23] - **Factor Name**: Gold in Asset Allocation Portfolios **Factor Construction Idea**: The impact of adding gold to a traditional stock-bond portfolio is analyzed to evaluate its contribution to portfolio performance[3][24] **Factor Construction Process**: 1. A baseline portfolio is constructed with 60% bonds (ChinaBond New Comprehensive Wealth Index) and 40% stocks (CSI A500 Index) 2. Two new portfolios are created by reallocating 10% of the baseline portfolio to gold (AU9999 spot gold): - Portfolio A: 50% bonds, 40% stocks, 10% gold - Portfolio B: 60% bonds, 30% stocks, 10% gold 3. Monthly rebalancing is applied, and backtesting is conducted over the period from January 3, 2005, to February 19, 2025 4. Risk-return metrics (e.g., annualized return, Sharpe ratio, maximum drawdown) are calculated for all portfolios[24][26] **Factor Evaluation**: Adding gold improves portfolio Sharpe ratios and reduces volatility, demonstrating its role as a stabilizing asset in diversified portfolios[26] Factor Backtesting Results - **Gold as a Portfolio Stabilizer**: - Sharpe Ratio: 0.59 (AU9999 spot gold), 0.57 (London spot gold), 0.56 (COMEX gold futures) - Maximum Drawdown: -44.88% (AU9999 spot gold), -44.62% (London spot gold), -44.52% (COMEX gold futures) - Annualized Return: 9.07% (AU9999 spot gold), 9.76% (London spot gold), 9.74% (COMEX gold futures)[23] - **Gold in Asset Allocation Portfolios**: - Portfolio A: Annualized Return 7.17%, Sharpe Ratio 0.72, Maximum Drawdown -35.47% - Portfolio B: Annualized Return 6.69%, Sharpe Ratio 0.88, Maximum Drawdown -26.86% - Baseline Portfolio: Annualized Return 6.63%, Sharpe Ratio 0.68, Maximum Drawdown -33.36%[26]