Tianfeng Securities: This year's "Spring Festival frenzy" market may continue longer

Tianfeng Securities Research Report states that this year, certain patterns may be reinforced: First, the foundation for the “Spring Awakening” market trend is more solid. Whether it’s the policy expectations at the start of the “14th Five-Year Plan,” the outlook for global liquidity easing, or the trend of residents reallocating funds into equity assets, these factors may strengthen the market’s upward pattern after the holiday, making this year’s “Spring Festival” rally potentially more sustained. Second, the front-loading and strengthening of consumption and travel trends. Due to the “historically long nine-day Spring Festival holiday,” consumer demand has been released significantly earlier than in previous years, and the scale of travel and consumption is expected to break new records, leading to more stable market expectations for an “economic recovery.” Third, the interval fluctuation in the bond market may be reinforced. In January, the central bank announced a 0.25 percentage point structural interest rate cut, indicating a reduced need for total rate cuts in the short term. If liquidity easing before the holiday drives bond market recovery, then after the holiday, with accelerated local government bond issuance and warming policy expectations, the probability of interest rate adjustments may increase.

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Tianfeng · Fixed Income | Bonds Stable Before the Holiday, Stocks Warm After? — The “Spring Festival Effect” in History

We believe that this year, certain patterns may be reinforced: First, the foundation for the “Spring Awakening” market trend is more solid. Second, the front-loading and strengthening of consumption and travel trends. Third, the interval fluctuation in the bond market may be reinforced. This year, some patterns that may be broken or weakened include: First, the “bond strong, stock weak” risk-avoidance mode before the holiday. Second, the weakening of stock style switching.

Looking ahead from this point, how will the stock and bond markets evolve around the Spring Festival? Which seasonal patterns might be reinforced or broken? This article focuses on these questions.

Since the beginning of the year: Reassessment of stock and bond values underway

Since the start of the year, the Shanghai Composite Index has risen for 16 consecutive days and has re-closed above 4100 points for the first time in 10 years. The combined trading volume of the Shanghai, Shenzhen, and Beijing markets has expanded to over 3 trillion yuan, followed by a high-level correction in the equity markets. There is a “hot and cold” phenomenon at the index level, with small and mid-cap stocks performing strongly, technology and growth leading the way, and large-cap blue chips showing smaller gains.

In the bond market, yields on interest rate bonds rose first and then fell in January, showing an overall “inverted V” pattern. Long-term yields performed relatively well, while ultra-long bonds were weaker; with coupon advantages, the credit market remained resilient, outperforming interest rate bonds, and credit spreads generally narrowed.

Ten-year Review: Stock and bond trends before and after the Spring Festival

(1) How have stocks historically rotated around the Spring Festival?

In the 30 days before and after the Spring Festival, the A-share market typically shifts from a volatile phase to an upward trend. The market also shows a clear style switch between large and small caps, shifting from the pre-holiday large-cap, dividend-oriented style to the post-holiday small-cap, growth-oriented style. Data from 2015-2025 shows that the proportion of years with style switching in this period reaches 81.82%. Additionally, in the 30 days after the Spring Festival, the market usually experiences a “Spring Awakening” rally, with higher probabilities of gains and larger average returns compared to the 30 days before the holiday, and market activity tends to increase.

Moreover, if the Spring Festival falls later in February, around mid to late February, two factors come into play: First, due to the offset of the holiday, working days in January may increase, potentially improving January’s economic and financial data year-on-year and boosting market sentiment; second, the policy expectation window between the holiday and the Two Sessions may be compressed, prompting some funds to pre-position, which could accelerate the “Spring Awakening” rally. Looking at late Spring Festival years in 2015, 2018, 2021, and 2024, the probability of the CSI 300 index rising before the holiday is 75%, higher than the average of 63.64%.

(2) How has the bond market historically behaved before and after the Spring Festival?

The core logic of bond trading around the Spring Festival may undergo phase shifts. Before the holiday, trading is characterized by “liquidity and certainty,” with bonds benefiting from a loose environment and allocation needs, typically performing more steadily. After the holiday, trading focuses on “economic growth and risk appetite,” as economic activity normalizes and key meetings approach, the market begins to debate the strength of economic recovery and the direction of policy stimulus, often leading to weaker bond sentiment and difficulty in lowering interest rates.

If the Spring Festival falls later in February, around mid to late February, two factors are relevant: First, the demand for cash withdrawals by residents in February is offset by credit issuance and tax payments in January, easing liquidity pressure; second, a late Spring Festival may lead to a more gradual release of January credit reserves, prompting banks and other institutions to pre-allocate bonds earlier and more actively, providing more time for trading to speculate on the loose liquidity before the holiday. Looking at late Spring Festival years in 2015, 2018, 2021, and 2024, the probability of 10-year government bond yields declining before the holiday is 75%, higher than the average decline probability of 63.64%.

Market Outlook: Will the “Spring Festival Effect” recur?

We believe that this year, certain patterns may be reinforced: First, the foundation for the “Spring Awakening” market trend is more solid. Whether it’s the policy expectations at the start of the “14th Five-Year Plan,” the outlook for global liquidity easing, or the trend of residents reallocating funds into equities, these factors may strengthen the pattern of market gains after the holiday, making this year’s “Spring Festival” rally potentially more sustained. Second, the front-loading and strengthening of consumption and travel trends. Due to the “historically long nine-day Spring Festival holiday,” consumer demand has been released significantly earlier than in previous years, and travel and consumption scales are expected to break new records, leading to more stable market expectations for an “economic recovery.” Third, the interval fluctuation in the bond market may be reinforced. In January, the central bank announced a 0.25 percentage point structural interest rate cut, indicating a reduced need for total rate cuts in the short term. If liquidity easing before the holiday drives bond market recovery, then after the holiday, with accelerated local government bond issuance and warming policy expectations, the probability of interest rate adjustments may increase.

Patterns that may be broken or weakened this year include: First, the “bond strong, stock weak” risk-avoidance mode before the holiday. Historically, due to liquidity easing and risk aversion, a “bond strong, stock weak” pattern often appears before the holiday. But this year, with a strong expectation of a “Spring Awakening” in stocks and an earlier timing, the market may not be dominated solely by risk aversion, and both stocks and bonds could have support, leading to more intense competition. Second, the style switch in stocks may weaken. Historically, small-cap growth styles tend to outperform after the holiday, but this pattern may still appear this year, though its strength could be limited by two factors: one, in the context of clear industry prosperity, large-cap growth may also perform well; two, the long-term logic of “high-dividend” assets as core holdings remains solid, so the post-holiday style may be a “dance of growth and dividends” rather than a simple switch.

Risk Warning: Policy uncertainties; unexpected changes in fundamentals; overseas geopolitical risks.

(Source: People’s Financial News)