Group 1: Report Industry Investment Rating - Not provided in the given content Group 2: Report's Core View - The economic cycle in the second half of 2025 is in an upward phase, and the current situation is similar to that from 2016 - 2017, in the second half of the L - shaped curve [2] - The upward correction of market expectation differences may drive the market to rise, and the current asset prices in the stock, bond, and commodity markets are all priced weakly [5] - In the context of the correction of economic expectations, there is a possibility of a stock - bond switch, with bond yields and the stock market expected to rise [7] Group 3: Summary by Related Directory 2025 Economic Situation and Factors Driving Recovery - The local debt resolution plan in November 2024 may promote continuous economic recovery, as debt rectification every about 5 years usually leads to economic rebound after completion [2] - The completion of policy digestion since November 2024 has led to a continuous rebound in the growth rate of social financing stock [3] - The supply - side anti - involution policy proposed on July 1, 2025, is similar to the 2015 supply - side reform and is conducive to the rebound of PPI year - on - year [3] Market Expectation Difference and Its Impact - The economic recovery in the second half of 2025 may not be as significant as that in 2016 - 2017, but there is a large upward space in market expectations, and the upward correction of expectation differences may drive the market to rise [4][5] - As of July 22, 2025, the equity risk premium rate of Wind All A was 3.14%, at the 72.1% historical quantile in the past 10 years; the 10 - year Treasury bond yield was 1.69%, at the 4.0% historical quantile in the past 10 years; the Nanhua Industrial Products Index was at the 43.2% historical quantile since 2022, indicating that asset prices are priced weakly [5] - The market's weak pricing logic is that the pressure to achieve the annual GDP target is not large, and the policy expectation for the second half of the year is low. However, there is an obvious expectation difference in the market's pricing of the expected economic recovery [5] Stock - Bond Switch in the Context of Economic Expectation Correction - The current economic situation is similar to that from 2016 - 2017, having ended the downward phase and entering a stabilization stage, with demand remaining stable. Policy is addressing structural issues to promote the stabilization of real estate and the normalization of inflation [7] - Although the economic recovery in the second half of 2025 may not be as significant as that in 2016 - 2017, in the context of the correction of economic expectations, there is a possibility of a stock - bond switch, with bond yields and the stock market expected to rise [7]

Report Industry Investment Rating - No specific industry investment rating is provided in the report. Core Viewpoints - As of July 21, 2025, the Wind All A Index broke through the high point on October 8, 2024, for the first time [3]. - The key logic for the market rally lies in the fundamental change in policy orientation and the economic cycle being in an upward phase. The current economy is similar to that in 2016 - 2017, in the second half of the L - shaped curve. In the second half of 2025, with no significant economic downturn and the resolution of structural issues, there may be a stock - bond switch, with bond yields and the stock market expected to rise [5][7]. Summary by Relevant Catalogs Market Understanding of the Rally - Industry highlights and thematic market trends may not be sufficient to drive the index up. For example, from 2022 - 2024, there were industry highlights like Huawei's chips in 2023, but the index continued to decline [4]. - The current market rally may not be mainly driven by the "national team" propping up the market. There were previous instances of the "national team" propping up in February 2024, but the market fell again after May 2024 [4]. - The reversal of the "American Exceptionalism" may not be the key factor. Overseas funds may not have flowed into China significantly, and the US and Chinese stock markets are rising in resonance [4]. - Low - interest rates may not drive the stock market up. From 2022 - 2024, bond yields declined, but the stock market fell. A high stock - bond ratio is not a sufficient condition for a rise, as seen from May - September 2024 [4]. Key Logic for the Rally - Policy orientation has undergone a fundamental change. The Politburo meeting in September 2024 marked a policy inflection point, ending the long - term economic de - leveraging from 2021 - 2024 and the local hidden debt rectification from January - September 2024 [5]. - The economic cycle is in an upward phase. After the policy inflection point in September 2024, market confidence has been on an upward path. Currently, it is similar to the second and third quarters of 2016, with significant upward potential in market expectations [5]. - The policy aims to stabilize the demand side and solve structural problems. Since July 2025, anti - involution policies and urban renewal are similar to the supply - side reform and shantytown renovation from 2016 - 2017. Although it may not drive a large - scale real - estate up - cycle or PPI growth over 7%, real - estate stabilization and positive inflation may boost market expectations [6]. Economic Expectation Revision and Stock - Bond Switch - The current economy is similar to that in 2016 - 2017, in the second half of the L - shaped curve. It has ended the downward phase from 2021 - 2024 and entered a stabilization phase, with the policy addressing structural issues to promote real - estate stabilization and inflation normalization [7]. - In the second half of 2025, with no significant economic downturn and the resolution of structural issues, there may be a stock - bond switch, with bond yields and the stock market expected to rise [7].