This week’s market index decline is not too severe, but different investors may feel different, the reason is that there are big white horses “flash crashes” almost every day this week, and these big white horses have a high degree of market attention, which is a blow to investor confidence. big. In fact, it is normal for these high-valued white horses to fall in the current economic environment. It is nothing more than which way they fall. The reason is also the basic operation law of the stock market. An unchanging iron law, this is the power of mean reversion and cycles.
I will try to analyze the core reasons for this round of decline below, find the reasons behind the phenomenon, and relatively see the future trend. My core point is:
1. This round of decline is just a continuation of the bursting of the bubble in the second half of 2020. This is based on the observation of the past trends of the market and individual stocks, and belongs to the category of facts. At this point, the basis for judging future market trends has emerged. This is whether the bubble is completely released, and specifically whether all kinds of Mao and various so-called track stocks have returned to the average or below the average. Of course, this analysis belongs to the first step of analysis. The second step is to put the above two types of stocks into today’s economic environment to analyze their business environment and future performance again. Seeing this clearly, the conclusion naturally surfaced.
2. The changes in the market microstructure under the registration system. My core views on this are: (a) At present, the large-cap blue-chip stocks represented by banks basically reflect the pessimistic expectations of the market. This view was not put forward today, but it has received considerable Some bank stocks trend verification. In other words, the Shanghai Composite Index has little room for downside. Unless there is an extreme situation such as war, which is unlikely at present, the reason is that the initiative is basically in China’s hands. I believe that China’s strength today and the ability and wisdom of China’s high-level leaders can deal with the complex situation in the Taiwan Strait. (b) The era of rising and falling at the same time has passed. In the future, there will be more structural market conditions. In the next few years, it is more likely to return to overvaluation (performance growth will also reduce the strength of the return, which is also what we see in the market.) , things develop and share prices are spiraling upwards) and undervaluation based on slow performance growth hedges this return trend. (c) The era of IPO subsidies for individual investors’ annual losses has become a thing of the past (in fact, it only makes you feel that you don’t lose money in a specific year, and the long-term trend after IPO is still down). In the future, individual investors The proportion of losses that year will be larger, especially those investors who are arrogant and do not think about evolution.
3. China’s current economic environment and outlook: Some people are worried about the impact of local government debt and fiscal revenue and expenditure on China’s economy. I personally think that this is not a big deal. The four major asset management companies of the year have already provided solutions for future problems. patterns and programs. What I mean is that China is capable of achieving the main macro goal of not having a systemic financial crisis in recent years. Our problem is the lower potential economic growth rate caused by the housing downturn, a topic I have discussed before. Judging from China’s current response, our general direction is right, that is, to use the registration system (this is only one of the methods) to achieve a breakthrough in the blockade of our technology abroad. Specifically: independent innovation of chip semiconductors, domestic substitution; new energy vehicles and new energy supply to find new economic growth points and breakthroughs; research and development investment in the field of biopharmaceuticals. This can be partially verified from the industry composition and IPO pricing of newly listed stocks under the registration system in recent years. Of course, there is also the comprehensive development and breakthrough of non-market-oriented national forces in the high-tech field. All these are not only to solve the bottleneck of foreign technology for us, but also to find new economic growth points. This path is difficult and dangerous, full of reefs and shoals, but it has to be walked. It is necessary for all Chinese people to unite and overcome difficulties in order to realize the great rejuvenation of the Chinese nation.
Below, we will look at the possible trends in the next six months from the specific micro level we are facing now.
Have investors noticed that snowball pessimism has spread recently, and even many investors who used to observe objectively and rationally have also become pessimistic. In fact, this article was inspired by @平无奇一平’s argument that the Fed’s interest rate cut is still a long way off. I will briefly discuss the following aspects:
1. Generally speaking, the more pessimistic the market sentiment is, the greater the possibility of bottoming out in the short term. Of course, this is based on investor sentiment. The most important determinant of the stock market is value, that is, whether the stock price is worth the money.
2. The dot plot of the Fed’s September meeting shows that the peak of this round of interest rate hikes is around 4.5%, and the rate hike will be in the range of 4%-4.25% by the end of the year, which may mean that this round of interest rate hikes is basically coming to an end. The most recent impact on the international market is the U.S. dollar index. The U.S. trade deficit in 2021 will be $859.1 billion. The strength of the U.S. dollar relative to other currencies is conducive to easing domestic inflation. Based on the strong dollar, we have seen dollar-denominated commodity prices fall, and oil prices have fallen sharply for four straight months. At least for now, all indications are that the chances of the Fed raising rates significantly next year are all but nil. And we know that the stock market can predict the economic outlook in advance. Generally speaking, the economy bottoms out half a year in advance. Even if the US maintains the interest rate level of around 4.5% for the next two years, the external shock will no longer exist.
3. The impact of global liquidity on the Chinese economy and stock market
One of the core reasons for the decline in recent weeks may be the strengthening of the US dollar, which has led many people to believe that foreign capital is fleeing China. I wrote an article before. The data shows that in the past three years, China’s actual use of foreign capital has increased year after year. The data is not as pessimistic as the pessimists think, foreign capital has been withdrawn substantially, and our economy is finished. Of course, there will also be investors who say, will this year be the downward turning point in the use of foreign capital? Data show that from January to August 2022, the actual use of foreign capital nationwide was 892.74 billion yuan, a year-on-year increase of 16.4% on a comparable basis (the same below), equivalent to 138.41 billion US dollars, an increase of 20.2%. So, comrades, Baidu can still be used sometimes. You can verify the authenticity in a few seconds. Don’t be too lazy. As for the large outflow of funds under the capital account, it is impossible. I am a computer illiterate. In fact, a master in data collection and processing is fully capable of making statistics on the inflow and outflow of foreign capital in the stock market. See if things are as bad as the pessimists think they are.
Conclusion: Every time the market falls, there are particularly many ghost stories. The falling stock market is the friend of the true value investor and the grave of the speculator. Real value investors embrace the bear market, just like sunrise and sunset, we should not only enjoy the sunrise, but also enjoy the beauty of the sunset. As an investor, it is not difficult to cross the bulls and bears. There is no bulls and bears in the heart, only the price and value. Naturally, you have mastered the magic weapon of crossing the bulls and bears. The essence of the stock market is how to value, and how to overcome greed and fear. I have written an article on this before, and interested investors can look it up by themselves.
The above are only personal opinions and do not constitute any investment advice! The stock market is risky, be cautious when entering the market!
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