Stable bonds before the holiday, warm stocks after?

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The latest research from TF Securities points out that the market performance at the start of 2026 is breaking traditional historical patterns. Since 2026, China’s capital market has shown a significant divergence between equities and bonds. The Shanghai Composite Index surged for sixteen consecutive days and climbed back above the 4100 mark for the first time in a decade, while the bond market experienced a “reverse V-shaped” trend of initial decline followed by a rebound. Standing at the important time point before the Spring Festival, historical data shows: The A-share market usually completes the transformation from volatility to an uptrend after the festival, with market style shifting from large-cap defensive pre-festival to small-cap growth post-festival.

The report highlights three major features of this year’s market environment that differ from historical patterns: First, driven by expectations for “15th Five-Year” policy, a global liquidity easing outlook, and a continued shift of household assets towards equity markets, this year’s “spring rally” foundations are more solid than in the past, and the post-holiday market rise pattern is likely to be reinforced.

Second, after the central bank’s 0.25 percentage point targeted rate cut in January, the need for further aggregate easing in the short term has decreased, and combined with an accelerated supply of local government bonds after the holiday, the bond market is expected to show a range-bound volatility pattern.

Finally, on market style, TF Securities believes that after the holiday, the market is unlikely to see a simple style switch; instead, it will more likely enter a complex game stage with growth and dividend styles interwoven and multiple logics coexisting.

Market Status: The 4100-Point Frenzy and the Bond Market’s “Reverse V” Reversal

In the first month of the year, the market has shown classic structural divergence and liquidity rebalancing. Supported by abundant liquidity, the equities market rebounded rapidly, with the Shanghai Index rising continuously and breaking the 4100 mark, and single-day trading volume at one point surpassing 3 trillion yuan. Though the index later entered a consolidation phase, small/mid caps and tech growth remained the main structural focus.

The bond market experienced periodic pressures during this time, affected by active capital flow towards equities and anticipated government bond supply. The 10-year government bond yield once rose to 1.9%, and the 30-year yield broke above 2.3%. The central bank later announced a 0.25 percentage point targeted cut, along with gradually released allocation demand, leading to stabilized market sentiment. By month-end, the 10-year yield retreated to around 1.8%. This movement shows that 1.9% is a key resistance point for upward rates, and the timely policy response further clarified the tone of liquidity environment remaining stable and slightly loose.

Historical Patterns: Stock-Bond Rotation Around Spring Festival

Stocks: Style Shift from Defense to Offense

Reviewing historical data over the past decade (2015-2025), the A-share market displays clear seasonal patterns around the Spring Festival. In the 30 days before the festival, the market is generally volatile; the CSI 300 index has a 63.64% probability of rising, with the average increase nearly flat, while the CSI 1000’s probability of rising is just 27.27%, clearly weaker—showing large-cap style dominance. In line with this, defensive sectors like banking and F&B usually have better pre-festival performance.

In the 30 days after the festival, the market typically ushers in the “spring rally”. The probability of a rise for CSI 300 increases to 72.73%, with an average gain of 3.15%, while CSI 1000 sees an outstanding probability of 81.82% and an average gain of 8.71%. This shows small-cap growth style is clearly favored; industries such as TMT and high-end manufacturing are particularly active after the festival.

Historical data shows that years with style switching in the 30 days before and after Spring Festival account for 81.82%, revealing a clear pattern of rotation from pre-festival defense to post-festival offense.

Bonds: A Phase Change in Trading Logic

The bond market also shows evident cyclical features around the festival. In the 30 days before the festival, the market tends to be stronger, mainly due to the central bank stepping up open market operations to ensure stable liquidity, and robust demand from allocation-driven institutions like banks and insurers. Historically, during this period 1-year government bond yields fall by an average of 5.73 basis points, while 10-year yields decrease by an average of 0.43 basis points.

For 30 days after the festival, the bond market may face adjustment pressure. Amid changes in policy outlook, increased bond supply, and a “see-saw effect” between stocks and bonds, the 10-year government bond yield climbs by 1.03 basis points on average, and the 30-year by 1.13 basis points. This reflects a clear shift in bond market trading logic: before the festival, the focus is “liquidity and certainty,” while after, it shifts to “growth and risk appetite.”

“Late Spring Festival” and Its Special Calendar Effects

Historically, calendar effects have had statistically significant short-term impacts on stocks and bonds. Reviewing 2015–2025, asset trends around the festival follow clear patterns, but the later timing of Spring Festival in 2026 (mid-to-late February) could amplify the probability of some historical signals emerging:

On the stock side, in general years, the market tends to be volatile before the festival (reflecting “hold cash for holidays”), and the “spring rally” only starts after the festival. However, in late festival years (2015, 2018, 2021, 2024), the pre-festival CSI 300 index had a 75% probability of rising, well above the all-year average of 63.64%, indicating a stronger willingness by funds to position ahead of time.

On the bond side, liquidity is generally ample before the festival, so bonds tend to strengthen; after the festival, as economic expectations warm, yields face upward pressure. In late festival years, the probability of falling 10-year government yields before the festival also hits 75%.

Overall, in late Spring Festival years, the probability of stocks and bonds both strengthening before the festival is about 75%, a statistical feature worth focusing on when judging the 2026 market rhythm.

2026 Outlook: Continued “Rally” and Style Reconstruction

Three Patterns That May Be Reinforced

First, the foundation for the “spring rally” is more solid. Whether it’s policy expectations for the “15th Five-Year” launch, prospects for global liquidity easing, or the trend of resident funds reallocating toward equity assets, all may reinforce the post-festival market uptrend. Non-bank deposits are surging, and with a clear AI sector theme, this year’s “spring rally” may be more sustained.

Second, the advance and enhancement of consumption and travel themes. This year’s “record long 9-day Spring Festival holiday” has led to a significantly earlier release of consumption demand than previous years. In 2026, consumer decisions about buying Spring Festival travel products averaged 7–10 days earlier than in 2025. Travel and consumption volumes are likely to break new records, and expectations for a strong economic start to the year are more stable.

Third, range-bound volatility in the bond market may be intensified. After the central bank’s 0.25 percentage point targeted rate cut in January, the need for further rate cuts in the short term is low. If the pre-holiday gamble on liquidity drives bond recovery, the post-holiday acceleration of local bond issuance and warming policy expectations may increase the probability of rate corrections.

Two Patterns That May Be Broken

First, the pre-festival “strong bonds, weak stocks” pattern could be broken. This year, the spring rally expectation for stocks is intense and early, so pre-holiday markets may not be a single risk-averse mode, but rather a situation where stocks and bonds both have support and competition intensifies.

Second, the style switch in equities may weaken. Historically, small-cap growth dominates post-festival, but this year two factors could limit this: One is the robust momentum in sectors like AI, boosting large-cap growth as well; the other is high-dividend assets, which remain a firm allocation logic for long-term portfolios, so post-holiday style may be “growth and dividends dancing together” instead of a simple complete shift.

Risk Warning and DisclaimerMarkets are risky, investment requires caution. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of any individual user. Users should consider whether any opinions, views or conclusions in this article are appropriate for their specific circumstances. Investments made accordingly are at your own risk. ```