Asset Allocation - The investment research framework has evolved from the traditional Merrill Lynch clock to a Chinese-style monetary credit model, reflecting significant changes in China's economic development model and the diminishing role of investment in driving economic growth [12] - In the new era, liquidity is identified as a core factor influencing asset prices, with the monetary cycle remaining highly relevant. Additionally, international factors, exemplified by US-China relations, significantly impact export engines and cross-border capital flows, becoming crucial for capturing asset price changes [12] Historical Review of Stock and Bond Performance - The report reviews stock and bond performance since 2018, highlighting that in 2018, macroeconomic fundamentals were weak, leading to significant stock market declines while bonds provided good coupon returns. In 2019, equity markets experienced volatility, and bonds continued to offer protection [18] - The analysis indicates that from 2020 to 2025, equity markets have shown resilience driven by technology stocks and structural bull markets, while bonds have entered a bull market phase characterized by declining yields [18] Long-term Bond Market Trends - Historical data shows that each bond bull market corresponds with a downward trend in 10-year government bond yields, driven by the interplay of "debt bulls" and "asset scarcity" [20] - The current bond bull market has seen 10-year government bond yields reach new lows, indicating a significant shift in the bond market landscape [21] Equity Market Trends - The equity market is believed to be in a long-term upward trend, with the current phase identified as the third wave of a five-wave cycle. This phase is expected to last longer than previous cycles, indicating a gradual upward movement [25] - The report draws parallels with Japan's experience, noting that after the economic bubble burst in the 1990s, the Japanese stock market entered a long-term upward channel, supported by structural reforms and monetary easing [29] Core Investment Themes - The report emphasizes a bullish outlook on A-shares and Hong Kong stocks, driven by stable US-China relations and a supportive global monetary environment. It suggests that technology stocks will lead the market in the next 5-10 years [36] - The bond market is expected to maintain a volatile environment, with a focus on coupon strategies as interest rates are projected to fluctuate between 1.7% and 2.0% [36]

Report Industry Investment Rating No investment rating information is provided in the report. Core Viewpoints - The currency-credit model is significant for asset allocation in a specific historical period, but with the internal transformation of the economic development model, a new way of thinking and investment framework is needed to view the new market trends of the bond and equity markets [1][3][31]. - The Merrill Lynch Investment Clock has limitations in practical application, and the Chinese version - the currency-credit model - has emerged, but it also faces the problem of weakened applicability due to economic changes [1][2][28]. Summary by Directory 1. Reexamine the Merrill Lynch Investment Clock and the Currency-Credit Model - **Merrill Lynch Investment Clock**: It is a typical framework for asset allocation, dividing the macro - economy into four quadrants based on growth and inflation. However, it has limitations such as low data frequency, time lag, and difficulty in accurately grasping cycle inflection points in real - world trading [1][11][12]. - **Growth and Inflation Cyclical Weakening in China**: Since 2012, the cyclical nature of China's economic growth (GDP) and inflation (CPI) has significantly weakened, causing the classic Merrill Lynch Investment Clock to be "ill - adapted" to the Chinese market [13]. - **Currency - Credit Model**: It is a Chinese - version of the Merrill Lynch Investment Clock, dividing the macro - economy from the currency and credit dimensions. It corresponds to the four stages of the Merrill Lynch Investment Clock and presents different asset performance in different stages. It innovatively incorporates liquidity factors into asset pricing [2][15][22]. - **Differences in Asset Pricing Logic**: The Merrill Lynch Investment Clock follows a top - down macro logic, while the currency - credit model uses the credit cycle to reflect the macro - economy and incorporates the currency cycle for a more comprehensive asset pricing [22]. - **Applicability Differences**: The Merrill Lynch Investment Clock is more suitable for the relatively mature capital markets in Europe and the United States, while the currency - credit model is more adaptable to the domestic investment environment. For example, the currency - credit model can better explain the 2015 equity market bull market [23]. - **Limitations of the Currency - Credit Model**: Due to the transformation of China's economic growth model, the currency - credit model may face weakened applicability. After 2008, investment became a key driver, and credit cycles were important. After 2020, consumption gradually replaced the credit cycle as an important indicator of economic prosperity [28][29].