- 2024-07-18
- News
Is the "Bull" Still in the Volatile Market?
Since the market entered its second phase, the most significant feeling for investors has been the sudden increase in operational complexity, while the value of the "asset allocation" concept continues to rise.
With the contraction of trading volumes in both markets, the market has experienced headwinds, and the Shanghai Composite Index has once again fallen below 3300 points, causing the emotions of many investors to fluctuate accordingly.
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What happened? Why is the market so volatile?
As with all the upward markets we have seen, the initial fervor will always have a moment when the brakes are applied, and then the market will often go through a period of consolidation and differentiation. The current index consolidation or increased volatility has its logic.
However, investors have also considered that the market's "indecisiveness" is roughly the result of the combined effects of several factors.
Firstly, as the initial stage of the market's widespread rise comes to an end, the market has entered a period of differentiation. When the money-making effect at the index level fades, some funds tend to lock in profits and secure gains before the end of the year.
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Secondly, the previous market rise was mainly driven by the improvement of risk appetite and the entry of transactional funds. However, due to the lack of new variables and strong catalysts in the short-term market, the difficulty of making hot topics has increased, and the activity of margin trading has fallen for two consecutive weeks.
Thirdly, since mid-to-late September, the market has experienced back-and-forth trading on policy expectations. With the arrival of a vacuum period for performance and policy, coupled with signals such as the weakening of real estate sales data in November after the policy pulse, the market's wait-and-see sentiment has become increasingly strong.
In fact, the current contradiction in China's macroeconomy still lies in the resolution of the internal debt cycle and the reversal of the CPI downward cycle. Objectively speaking, the overseas policy cycle, monetary environment, and global economy will undoubtedly increase the twists and turns of domestic economic recovery, but the factor that determines the directional trend is still "me-centered". The domestic policy tone has clearly shifted, and it needs time and more information to assess and respond to internal and external pressures in terms of rhythm.
At present, we may not expect a "one-shot" result from a single meeting. What's more important is to pay attention to the evolution of confidence and stable expectations. The policy logic for the next stage is mainly about partial confirmation and continued waiting for confirmation, and there is no issue of refutation. Subsequently, we should closely monitor the Central Economic Work Conference in December for its tone on population, consumption, and other fields, as well as the work arrangements for the Two Sessions in March next year.
But in any case, similar to the recovery scenarios in November 2008, the end of 2014, and the beginning of 2019, the key to the start of this round of A-share market sentiment lies in a series of precise policy combinations that have successfully reversed investors' pessimistic expectations. The decision-makers'正视 of difficulties and the shift in attitude towards supporting the capital market are the solid foundation for the market's performance and the raising of the bottom.
Therefore, despite the current market's "short-term headwinds", starting from "924", the subsequent evolution of the market is still full of infinite possibilities, and the story of the new cycle is still "to be continued".
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Is the "bull" still there? What about the future market?
Subsequently, China's own policy efforts are the "internal cause", and external factors act through internal causes, and even the adverse external factors can stimulate the "reflexivity" of internal causes, leading to an excess market similar to the A-share semiconductor sanctions from 19-21.
As the need to stimulate domestic demand becomes increasingly prominent, potential incremental policies for next year include a higher deficit ratio, larger transfers to localities, more active consumer promotion measures, and greater exchange rate flexibility.
At the same time, market news shows that export tax rebates in various industries are declining, and future tax subsidy methods may shift from subsidizing overseas consumers to subsidizing domestic consumers. This fundamental change in policy thinking is also expected to become a source of long-term and in-depth investment opportunities.
On the other hand, when the market has quickly factored in the potential policy space of China and the complexity of tariff pressure, it may open up space for the subsequent "year-end market".
Looking back over the past 10 years since 2014, A-shares have experienced 6 cross-year markets. The core factor for their occurrence lies in the strong policy expectations at the end of the year and sufficient incremental funds, while the marginal improvement in the industry's fundamentals will also bring better structural market opportunities.
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Mixed expectations of bulls and bears, how should investors respond?
Looking ahead, the game between bulls and bears will definitely continue, and market fluctuations may not be small, but in a market that is reversing the old narrative and gradually returning to rationality, we choose excellent targets, focus on a balanced allocation of broad-based + shareholder returns (dividends) + new quality production capacity (chips, military), and buy low, which is still an investment method that combines both odds and winning probability at present.
First, maintain calm thinking and rational layout.
Between the changes and constants of the market, not being emotional and staying calm and rational is the premise for investors to make correct judgments. The key issue is not whether the bull has come or is still there, but being prepared for changes in any situation.
As the trading volume increases, it is inevitable that fluctuations will be amplified on a phased basis. But if your risk preference and investment horizon have not changed, then the current profit and loss should not become the standard for trading your assets.
After all, what really determines whether to buy/sell is the proportion of individual asset positions and whether the current price of the asset is reasonable, there is no need to empathize with any pessimistic emotions. And every setback on the way of the cycle is an opportunity for review. Skillfully using the market's turbulent period to adjust asset allocation is undoubtedly a wise move.
Second, strengthen investment discipline and set stop-profit and stop-loss targets.
The equity market is always like this, with historically changeable emotions, constantly testing investors' wisdom and patience in the ups and downs. While doing a good job of risk prevention and control, if you can effectively follow investment discipline and carry out planned replenishment and profit-taking operations, you can effectively avoid being "carried away" by market trends.
For the directions you are optimistic about, under the premise of being in line with your own risk-bearing capacity, you can take a phased approach to buying or a fixed investment to layout, which can not only reduce the risk of high single purchase costs but also accumulate chips for future market fluctuations. And when the satisfactory profit target is reached, you can harvest the results in time and start the next investment cycle.
Perhaps more and more investors are beginning to realize that in the current rapidly changing market environment, transactional strategies do face some challenges, but diversified allocation strategies are still an effective answer to market fluctuations.
For now, it might be best to make good allocations, remain patient, and then wait for the wind to come.
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