The Duel of Spear and Shield

Over the past week, the macro environment has undergone significant changes. U.S. Treasury yields have risen very rapidly, with the 30-year yield already breaking through 5%. Furthermore, long-term government bond yields in other developed countries like Japan and the UK have also increased substantially.

As the pricing anchor for risk-free assets, the rise in long-term interest rates severely dampens the appetite for risk assets. Therefore, the overall performance of U.S. stocks at the end of last Friday and Chinese A-shares yesterday was relatively weak.

However, some sectors have managed to continue rising despite the relatively high interest rates, and this is undoubtedly the AI sector. The core reason remains that the overall performance of the AI sector is indeed very strong. The Q1 earnings season for U.S. stocks is nearly over. Among the Q2 guidance disclosed by reporting companies, tech stocks remain the strongest, able to withstand the 5% high interest rate.

Therefore, tech stocks will naturally be affected by high interest rates in the short term and may see some adjustments. However, as long as earnings don't miss expectations, the overall adjustment range won't be particularly large.

Nevertheless, the impact of high interest rates cannot be ignored. The essence of high interest rates is the rising inflation expectations. Oil prices have already reached a relatively high new equilibrium level. Furthermore, apart from the tech sector, areas like small-cap stocks and non-tech stocks, such as the healthcare sector, have all been significantly suppressed by high interest rates. Currently, the overall market breadth is being continuously compressed, and the entire index is being led by the large-cap tech stocks at the top.

So at this time, if you want to explore some hedging directions for tech stocks, on one hand, you can gradually position on the left side for these long-suppressed assets. On the other hand, you can also hedge along the inflation line, and it's still appropriate to allocate some to sectors related to commodities like crude oil and non-ferrous metals.

(Not as investment advice)

$Direxion 20+Yr Trsry Bull 3X(TMF.US) $Guotai CSI Non-ferrous Metal ETF(159881.SZ)  $Harvest Crude Oil Fund(QDII-LOF)(160723.SZ)