22V Research, a top investment firm on Wall Street, stated that the steepening of the overall yield curve of U.S. Treasuries across various maturities serves as a strong tailwind for the "Magnificent Seven" in the U.S. stock market (also known as the seven giants of U.S. stocks). However, the firm indicated that if the steepening of the U.S. Treasury yield curve significantly slows or turns from steep to flat, the performance of the "Seven Giants" and other large tech stocks will also face downward adjustments.

Therefore, from the perspective of the strategist team at 22V Research, the transition of the U.S. Treasury yield curve from recent stagnation or flattening to an upward-sloping steepening trend may indicate that the "Seven Major Tech Giants," which occupy a high weight (30%-40%) in the U.S. stock market, will embark on a new upward momentum.$S&P 500 Index (.SPX.US)$And$NASDAQ 100 Index (.NDX.US)$

From a month-on-month benchmark perspective, the variation of the overall US Treasury yield, including yields of all maturities, is in the 94th percentile of historical monthly changes. Among them, the 10-year US Treasury yield, known as the "anchor for global asset pricing," has risen to 4.56%, with a variation of as much as 66 basis points this year.

In addition, investors generally expect the Federal Reserve's rate cuts in 2025 to be significantly reduced from the previous expectation of four cuts to 1-2 cuts, while the nominal yield across the entire US Treasury yield curve has risen sharply since November; an end to the US Treasury yield curve inversion in 2024 would imply that investors are generally pricing in that inflation will be controlled under the Federal Reserve's maintenance of high interest rates for the long term, and that the US economy will not experience a deep recession. According to 22V Research, these are all positive catalysts for the "Magnificent Seven."

It is understood that Denny's Debschel, president and chief market strategist of 22V Research, stated in a portfolio strategy report that although large-cap stocks led by the "Magnificent Seven" currently support the entire US stock market, the "Magnificent Seven" is gradually weakening from a technical sell-off point near the "extremely overbought level."

The latest views from 22V Research are truly disruptive to investor cognition. According to the valuation system of finance, the steepening of the US Treasury yield curve is undoubtedly a significant negative catalyst for the valuation of the entire stock market. However, 22V Research believes that the trend of steepening is the core catalyst for the "Magnificent Seven" to initiate a strong rise in stock prices.

When will the seven giants of the USA stock market rise again? The answer may lie in the "U.S. Treasury yield curve."

The steepening of the US Treasury yield curve (where long-term interest rates rise faster than short-term rates) is usually seen as a signal of strengthening economic growth and corporate earnings expectations. Although rising long-term rates can increase corporate financing costs, 22V Research noted in their report that for the seven major tech giants with strong profitability and abundant cash flow, a different logic applies.

From a DCF valuation model perspective, the valuation of technology companies is typically based on the discounting of future cash flows. A steep yield curve indicates that long-term rates are rising, which could lead to increased discount rates, placing significant pressure on the valuation of growth companies, particularly those in the CNI Mid-Small Cap.Index. However, if the market expects strong economic growth that drives a steepening of the US Treasury yield curve, the strong profitability of the "Seven Giant Tech" firms, along with their abundant cash flows and increasing share buyback programs, can still support their high valuations, attracting global funds from other stock markets and sectors to flow fully into the "Seven Giant Tech".

This logic also explains why the Federal Reserve's expectations for interest rate cuts fluctuated unpredictably in mid-2023 to the first half of 2024, and even seeing significant retreats of rate cut expectations. The trend of economic growth in the USA is not particularly strong, nor is it weak enough to fall into a recession, leading to the "Seven Giant Tech" outperforming value-oriented large-cap stocks and broadly mid-small cap stocks, cyclical stocks, and all types of stocks since 2023, and becoming the core logic driving the surge in the S&P 500 Index and the NASDAQ 100 Index.

Therefore, since 2023, despite the recurrent pressure on interest rate cut expectations and the significant slowdown of economic growth in the USA, the "Seven Giant Tech" have become a safe haven for global funds in the context of fluctuating rate cut expectations and economic slowdown, thanks to their unparalleled AI-driven revenue scale, solid fundamentals, robust free cash flow reserves, and expanding share buyback programs.

22V Research noted that conversely, if the steepening of the yield curve slows or even flattens, it may indicate a slowdown in market expectations for future economic growth in the USA, or a significant increase in expectations for interest rate cuts by the Federal Reserve, which could negatively affect the seven major tech giants, leading to significant outflows of funds from these tech giants into the bond market, defensive stocks, or mid-small caps that are more sensitive to interest rate expectations.

"The seven major technology giants of the USA" refer to the so-called "Magnificent Seven", which includes: $Apple (AAPL.US)$ 、$Microsoft (MSFT.US)$、 $Alphabet-C (GOOG.US)$ 、$Tesla (TSLA.US)$、$NVIDIA (NVDA.US)$、$Amazon (AMZN.US)$And$Meta Platforms (META.US)$They are the key driving force behind the continuous new highs of the S&P 500 Index. Looking at the entire American stock market, the "seven major technology giants" have been the core strength leading the rise since 2023. They attract global capital with strong revenue brought by AI deployment, solid fundamentals, consistently strong free cash flow reserves over the years, and an expanding scale of Share Buyback.

Another core catalyst driving the surge of the "Seven Giant Tech" is their incredibly strong profitability.

22V Research states that the stock price increase of the "seven tech giants" not only relies on the yield curve of US Treasuries, but also the robust growth rate of EPS in 2025 and 2026 is crucial for their price rise. However, 22V Research believes that under the strong push of the AI boom and market dominance, the EPS of the "seven tech giants" will continue the strong performance seen since 2023. Therefore, in terms of short-term price momentum, the steepening of the "US Treasury yield curve" may be a core positive catalyst for the "seven tech giants".

The team led by Denny's De Becher, Chief Market Strategist at 22V Research, states that strong earnings expectations remain a strong support for large stocks like the seven tech giants, and their valuations require a strong growth trend in EPS in 2025 and 2026. "If the risk of a US economic recession does not significantly increase and earnings expectations do not face substantial downside risks, then the likelihood of large-scale outflow from large stocks is low."

John Rock, head of stock technical strategy at 22V Research, stated, "The seven tech giants recently fell from the upper boundary of their ascending price channel to the lower boundary in the last two adjustment periods, with declines of -13% and -16% respectively. The current similar correction phase indicates that, according to the current technical pattern, focusing on the ETF related to the seven tech giants—Roundhill Magnificent Seven—still has a correction of approximately -12% from last Friday's closing price."

According to statistics, in terms of expected EPS, the seven tech giants account for about 24% of the overall expected EPS of the S&P 500 Index, and about 14.5% of the expected sales of the S&P 500 Index for the next 12 months.

"Currently, the overall market's broad conditions are far from recession levels. Even if recession has not become the baseline scenario, the internal catalytic factors of the market may further weaken," said De Becher from 22V Research. "As the yield spreads widen, the curve flattens, and the FCI (American Financial Conditions Index) tightens, the overall US stock market may continue to decline."

How to layout the "seven major technology giants"? Four-word advice: Buy on dips.

22V Research states that if the "seven tech giants" overall retracts by 13%-16%, combined with a slowdown or stagnation in the steepening of the US Treasury yield curve, it would be a good opportunity to buy on dips. A finance professor from New York University, known globally for broadening financial market valuation systems, stated that these seven giants are an excellent buying opportunity during stock market adjustments because most of them will continue to achieve strong profit growth trends with fundamentals that are "rock solid."

Aswath Damodaran, a finance professor at NYU Stern School of Business, recently stated in a media interview: "As a long-time value investor, I have never seen profit-generating machines as incredibly lucrative as these large tech companies, with such strong fundamentals. Moreover, I believe the growth momentum of these profit machines will not weaken anytime soon."

"There will always be some degree of market adjustment. I suggest that when this happens, at the very least, try to increase your holdings in one of the giants, or perhaps two to three would be even better, as they significantly drive the upward momentum of the USA economy and the entire U.S. stock market," the NYU finance professor added.

Damodaran also stated in the interview that the seven major tech giants, including AI chip leader NVIDIA, have "extremely ample profits," and he remains firmly committed to holding these seven tech giants.

These tech giants, representing the forefront of human technological strength, have dominated global technology investment prosperity in recent years and have led the AI investment craze since 2023. Investors are betting on the fervor for generative AI, with tech giants like NVIDIA, Apple, and Google possessing vast market sizes and strong financial strength, positioning them best to leverage AI to expand revenue.

It cannot be exaggerated that they are the greatest contributors to the long-term bull market of the U.S. stock market. According to the outlook from finance professor Damodaran and major Wall Street firms, these giants are expected to continue leading the U.S. stock market to new highs by 2025. The Barclays strategy team recently predicted that, driven by strong profit growth trends among large tech giants and the resilience of the American economy, the S&P 500 Index will reach new highs of 6600 next year. The UBS analysis team indicated that the tech sector, represented by the seven major tech giants, remains the preferred sector in the U.S. stock market, with next year's increase expected to exceed the broader U.S. market — the S&P 500 Index. UBS predicts the S&P 500 Index could reach 7000 points by 2025.

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