《Better Wealth with Qiu》Global bond markets are experiencing turbulence, particularly France becoming the main target of selling pressure in European sovereign debt. Market concerns over France's fiscal deficit and political instability have pushed the yield on French 10-year government bonds to the highest level in over two decades. The yield spread between German and French 10-year government bonds has widened to the largest since the European debt crisis in 2012, fueling discussions of a 'Eurozone Debt Crisis 2.0.' On the other hand, despite U.S. Treasury Secretary Bessent reiterating efforts to reduce debt levels through economic growth and spending control—meaning if economic growth outpaces debt growth, the debt-to-GDP ratio will decline—U.S. 30-year bond yields continue to rise, and 10-year yields remain elevated. Nevertheless, U.S. stocks continue to show strength.
In fact, while the S&P 500 Index hits new highs, over seventy percent of its constituent stocks are simultaneously hitting 52-week lows. Funds are highly concentrated in high-growth AI-related stocks. The author expects this trend to persist, as both the S&P 500 and the Philadelphia Semiconductor Index are still trading at near multi-year low forward price-to-earnings ratios. With earnings season approaching, according to FactSet data, the market expects U.S. corporate earnings for the third quarter to rise 29.5% year-on-year. If earnings once again surpass expectations, it could trigger underweight CTA quantitative trading desks to catch up, providing further momentum for U.S. stocks. Therefore, quality individual stocks experiencing temporary pullbacks ahead of tech earnings announcements may present good entry opportunities.
What defines a quality stock? Besides not having excessive debt, it should meet the following three criteria: first, even as production capacity continuously expands, the product remains in short supply; second, even as production capacity keeps increasing, the product can still continue to raise prices; third, the product contributes to token cost reduction (Token Deflation). Taking TSMC's advanced process nodes and NVIDIA's GPUs as examples, each product upgrade enhances computing efficiency and increases token output, thereby reducing token costs. As costs decline, companies' willingness to adopt AI increases, benefiting cloud service providers' revenue growth, which in turn allows them to continue investing in semiconductors. Besides these two companies, optical communication also meets these criteria.
Regarding risks, short-term attention should still be paid to oil price volatility. In the medium to long term, bond markets face structural supply and demand imbalances. Besides government bond issuance, technology sector corporate bond issuance is expected to increase significantly next year, keeping long-term interest rates high. Liquidity risks may first emerge in non-AI industries, which will need to be confirmed next year.《Wendy Qiu, Senior Analyst,华盛证券》
*The author does not hold any of the aforementioned stocks
*The signed and/or unsigned articles published in《Economic Information Daily》represent the authors' personal opinions and do not reflect the stance of《Economic Information Daily》.《Economic Information Daily》plays the role of providing a free platform for expression.
In fact, while the S&P 500 Index hits new highs, over seventy percent of its constituent stocks are simultaneously hitting 52-week lows. Funds are highly concentrated in high-growth AI-related stocks. The author expects this trend to persist, as both the S&P 500 and the Philadelphia Semiconductor Index are still trading at near multi-year low forward price-to-earnings ratios. With earnings season approaching, according to FactSet data, the market expects U.S. corporate earnings for the third quarter to rise 29.5% year-on-year. If earnings once again surpass expectations, it could trigger underweight CTA quantitative trading desks to catch up, providing further momentum for U.S. stocks. Therefore, quality individual stocks experiencing temporary pullbacks ahead of tech earnings announcements may present good entry opportunities.
What defines a quality stock? Besides not having excessive debt, it should meet the following three criteria: first, even as production capacity continuously expands, the product remains in short supply; second, even as production capacity keeps increasing, the product can still continue to raise prices; third, the product contributes to token cost reduction (Token Deflation). Taking TSMC's advanced process nodes and NVIDIA's GPUs as examples, each product upgrade enhances computing efficiency and increases token output, thereby reducing token costs. As costs decline, companies' willingness to adopt AI increases, benefiting cloud service providers' revenue growth, which in turn allows them to continue investing in semiconductors. Besides these two companies, optical communication also meets these criteria.
Regarding risks, short-term attention should still be paid to oil price volatility. In the medium to long term, bond markets face structural supply and demand imbalances. Besides government bond issuance, technology sector corporate bond issuance is expected to increase significantly next year, keeping long-term interest rates high. Liquidity risks may first emerge in non-AI industries, which will need to be confirmed next year.《Wendy Qiu, Senior Analyst,华盛证券》
*The author does not hold any of the aforementioned stocks
*The signed and/or unsigned articles published in《Economic Information Daily》represent the authors' personal opinions and do not reflect the stance of《Economic Information Daily》.《Economic Information Daily》plays the role of providing a free platform for expression.
