US CPI exceeded expectations by 3.7% YoY and PPI 6.3% YoY in September, but the response of the US bond long-term yield quickly deteriorated within 24 hours: after the CPI was announced on October 14, the 10-year US Treasury yield first surged about 13 bps to 5.325%, then closed back down; after the PPI was announced on October 15, the 10-year period only rose by about 2.5 bps, and then fell directly to around 5.048% for the 10-year period. We judge that the market's power to price inflation is rapidly drying up, and the long-term pricing anchor is clearly oriented towards the “growth/AI cycle” — the “decline” in pricing is essentially a risk at the end of the AI capital expenditure cycle, rather than a decline in traditional demand, and can go hand in hand with stagflation. Currently, it is still exploratory pricing on the left and does not constitute trend confirmation. In the short term, US stocks may continue to rotate in the industry, shifting capital from AI themes to daily consumption of energy and defensive attributes, and health care that may benefit from the Democratic Party's sweeping expectations. Meanwhile, Hong Kong stocks may also benefit from a reversal in overseas AI hardware transactions, as well as capital allocation brought about by Indonesia being excluded from the MSCI Emerging Markets Index. At the industry level, in addition to dividends, we are also optimistic about consumer electronics, CXO, and innovative drugs on Hong Kong stocks.

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