CMSC: Which is more critical, fundamentals or liquidity?

CMSC released a research report stating that September exports accelerated beyond seasonal norms, with growth momentum spreading; PPI rose to 5.0% year-on-year, and rising oil prices may push PPI further upward in October. This month's FOMC should leave rates unchanged, but a faster pace of rate hikes starting in December is highly likely, and global liquidity remains in a contraction phase before the 10Y/2Y U.S. Treasury yield curve inversion arrives. On the comparison between the importance of fundamentals and liquidity, the bank believes that unless strong growth momentum or reliable cost support serves as a safety cushion, liquidity tends to have a more direct impact on asset prices. Current Capital IQ data still shows that global capital expenditure may have peaked year-on-year in Q3; if confirmed, along with the Fed's future accelerated rate hikes, U.S. equities in 2027 also face significant correction risk. Domestically, the bank believes Treasury bond prices still have room to rise, and on the equity side maintains the view of traditional energy > consumer, dividend > others. CMSC's main views are as follows: 1. Domestic: September's overall foreign trade performance was "exports accelerating beyond seasonal norms, growth momentum further spreading, but the divergence between orders and value growth has not been eliminated." September PPI rose 5.0% year-on-year, 1.2 percentage points wider than August, and a higher oil price center may push October PPI further upward year-on-year. September was a quarter-end month, bank credit extension rose, and with the implementation of some policy-based financial instruments, credit showed signs of stabilizing at the margin. 2. Overseas: 1) U.S. AI risk is shifting from valuation to credit. On October 15, the 5-year credit default swap (CDS) spread of Core Weave, an AI computing power leasing company invested in by Nvidia, rose intraday to 1,195 basis points, a record high, implying a roughly 64% probability of default within five years. In addition, Oracle's 5-year CDS spread widened 31 basis points to 288 basis points, SoftBank widened 24 basis points to 424 basis points, and bonds for data center projects leased by Meta, Microsoft, and Nvidia also fell into a stressed range. 2) This month's FOMC should leave rates unchanged, but a faster pace of rate hikes starting in December is highly likely. Before the 10Y/2Y U.S. Treasury yield curve inversion arrives, global liquidity remains in a contraction phase; the Indonesian market crash on the 16th was the result of a liquidity shock. 3. Assets: Which is more critical, fundamentals or liquidity? Unless strong growth momentum or reliable cost support serves as a safety cushion, liquidity tends to have a more direct impact on asset prices. Current Capital IQ data still shows that global capital expenditure may have peaked year-on-year in Q3; if confirmed, along with the Fed's future accelerated rate hikes, U.S. equities in 2027 also face significant correction risk. Back domestically, the bank believes Treasury bond prices still have room to rise, and on the equity side maintains the view of traditional energy > consumer, dividend > others.