The market often sees a pullback before the National Day holiday and a broad rally afterward. Historical data shows a median return of 2.16% for indices in the 20 trading days post-holiday, with a win rate of 75%. Small-cap stocks tend to underperform large-caps before the holiday, but they show stronger elasticity afterward, with the CSI 1000 leading with a 1.88% gain and the CSI 2000 achieving a 75% win rate.

In terms of style, consumer stocks see positive returns before the holiday, while financial and growth sectors shine afterward. Financials post the highest cumulative gain of 2.37% with a 75% win rate over the 20 days post-holiday, followed by growth at 1.89%. All styles record positive returns during this period. Domestically, August industrial output growth beat expectations, though social consumption and investment softened from July. Internationally, the Fed's rate decision is in focus, with a 57.6% probability of a 25-basis-point hike in October 2026. The path to a market inflection point remains challenging, with AI industry trends being a key focus. Risks include geopolitical conflicts, persistent overseas inflation, and tighter liquidity.

The Federal Reserve's recent meeting tightened dollar liquidity, with the announcement shifting from easing to tightening. The valuation score is neutral-to-bearish, macro odds are bearish, capital trends are neutral-to-bearish, and crowding reversal signals are neutral-to-bullish. The overall weekly score is -0.12, reflecting a neutral-to-bearish stance. Sector rotation suggests focusing on defensive sectors like coal, oil and petrochemicals, textiles and apparel, transportation, and banking. Electronics and non-ferrous metals remain crowded, so near-term attention should be on coal, oil and petrochemicals, and banking. Communication and tech innovation tracks still offer short-term opportunities. These conclusions rely on historical data and statistical models, which may fail if market conditions change significantly.

Weekly liquidity has shifted from tight to loose due to tax payments and government bond settlements. Large banks' net lending has declined seasonally, with certificate of deposit issuance expanding, particularly for 9-month and 1-year tenors at state-owned banks, with rates stable around 1.490%-1.495%. The effect of overnight reverse repos in smoothing volatility appears limited, as the cumulative impact of short-term liquidity absorption, large government bond net payments, and seasonal quarter-end demand have offset operations. Looking ahead, the central bank's precise operations should keep liquidity stable, with attention on medium-term liquidity injections, net lending by large and small banks, CD issuance structure, and government bond supply.

Over recent years, small and mid-sized banks have not truly shrunk their balance sheets but have engaged in "asset substitution," with weaker credit lending and stronger bond allocation. This substitution requires deposit pricing advantages and asset expansion capacity. In 2026, this logic weakens as traditional business lines—deposits, loans, and treasury operations—begin shrinking, reducing bond allocation while treasury desks expand to absorb excess liquidity. Small banks' pricing power in long-duration bonds declines, but they may moderately increase allocation around year-end to achieve early deployment and returns, with some institutions potentially acting ahead of schedule. Risks include unexpected liquidity tightening, insufficient policy support, and estimation errors.

Low-valuation sectors like consumer, agriculture, and non-bank finance offer historical low valuations, presenting left-side opportunities. In tech growth, the AI trend remains intact, with a focus on order visibility and valuation alignment. For US equities, the medium-term outlook is not bearish. In the equities market, tech remains the core direction, supported by communication and electronics, though overall market adjustment risks persist due to policy expectations and weak fundamentals. The bond market maintains a medium-term bullish outlook, supported by domestic fundamentals and policy, with the central bank's 14-day reverse repo operations adding liquidity. The precious metals market faces short-term adjustment pressure, with a bearish model stance.

In the hog sector, trend selection outweighs timing, with continued capacity reduction supporting a new cycle. Forward contracts don't reflect future prices, so focus on capacity reduction trends. With dual losses, capital pressure, and policy controls, industry destocking continues. In the dairy sector, profit inflection has begun, with milk prices reversing upward amid school orders and holiday stocking. Heat stress has tightened milk supply, driving price gains across regions. In planting, El Ni帽o development requires attention to autumn harvests. For animal protection, new business expansion offers growth, with pet vaccines as a blue-ocean market benefiting from aging pets and rising spending. In poultry, white-feather chickens face import uncertainty due to avian flu, while egg prices remain strong with stable chick prices. Risks include disease outbreaks, agricultural price volatility, and regulatory changes. The mentioned companies are for reference only and do not constitute investment advice. The report is excerpted from publicly available research, with full details in the complete document.