Today's market performance reminds us of two stock market sayings: one is "A thousand gold cannot buy the bull's return," and the other is "Bulls have many sharp drops, bears have many sudden surges." The essence of these sayings is to tell us that whether it's a bull market or a bear market, there will be violent fluctuations and shocks, ultimately testing human greed and fear.

Today's trend in the major A-share market should have given many stock investors who rushed in a roller coaster ride. The Shanghai Composite Index opened up more than 10%, with the index once breaking through 3600 points, but then it continuously narrowed to 2%, and finally closed at 3489 points, with a daily increase of 4.59%; the ChiNext Index opened up more than 18%, once narrowed to 10%, and finally increased by 17.25%. The total trading volume of A-shares in the three markets exceeded 3.4 trillion yuan throughout the day, setting a new historical record.

Advertisement

The reason for the roller coaster is partly due to the Hang Seng Index, which had soared during the holiday, taking the lead in diving. Among them, the Hang Seng Index once fell more than 9%, and the Hang Seng Technology Index even fell more than 13%. In addition, the FTSE China A50 index futures once fell by 10%.

Many people must have started to hesitate and even doubt the bull market. This morning, the press conference held by the State Council Information Office seemed to have not played the role of "adding fuel to the fire." In fact, those with some stock market experience should understand that it is quite normal to have a pullback after the continuous rise before the holiday. If the subsequent market shows differentiation, it is also a normal trend.

The only issue that still needs to be considered is: how long can this historical major trend last?

01 This time, replicate the "519 trend"?

To answer the above question, we should first look for answers from historical experience.

There is a saying in the stock market, "There is nothing new under the sun." Many times, retail investors like to say "this time is different from before," but in fact, in the end, it often still cannot escape the past experiences and lessons.

We must recognize that no matter how technology progresses, the psychology and behavior of the public will not have much progress compared to decades ago.

Looking back at the past, although this "924 trend" started very suddenly and rose so fast and fiercely, many people think it is unprecedented. However, there are traces in the history of A-shares, and I personally feel that the most similar to this trend should be the "519 trend" from the end of last century to the beginning of this century.The similarities between these two major market trends are reflected in many aspects. On the surface, looking at the stock price index trends, the "519 trend" also rose very sharply and quickly. From May 19, 1999, to June 30, A-shares increased by 66% in 31 trading days.

On June 25 of that year, the A-share trading volume reached 20 times that of the pre-trend period. It is important to note that this was 25 years ago, before the internet was widespread, and buying and selling stocks were not as convenient as they are now, nor was public opinion spread as quickly. This shows that its fervor was not inferior to the present.

The significant and rapid rise in the index is secondary; the most similar aspect between this round of the trend and the "519 trend" lies in the macroeconomic background, such as deflationary pressure, low financing demand, loose liquidity, and a deteriorating external environment, all of which have many "striking similarities."

Specifically, at that time, the arduous three-year state-owned enterprise reform to shed overcapacity had just begun, and the severe floods in 1998 added insult to injury. Under the impact of one after another, in the fourth quarter of 1999, China's GDP growth rate fell to 6.7%, setting a new low for the same period. The external environment was also not optimistic, with the outbreak of the 1997 Asian financial crisis, a severe export situation, and the South China Sea collision making the surrounding situation tense.

Under these circumstances, the central bank continuously cut interest rates, and monetary policy was significantly relaxed, but financing demand remained low, and the economy urgently needed to find a new fulcrum.

Looking back at the past few years, from the state-owned enterprise reform to shed overcapacity, to the sudden arrival of the pandemic, from the Russia-Ukraine war to the Federal Reserve's aggressive interest rate hikes, from the slowdown in GDP growth to the continued sluggishness of A-shares, comparing internal and external factors to more than 20 years ago, doesn't it feel somewhat familiar?

Therefore, how this round of the trend will develop in the future should focus on the development process of the "519 trend."

02 There is no turning back once the bow is drawn

Like the "519 trend," this "924 trend" can also be defined as a policy-driven trend, entirely stemming from a series of national policy "combination punches." Therefore, how the subsequent trend will develop needs to be observed from two aspects: whether subsequent policies can continue to be promoted and implemented, and whether the economic fundamentals have improved after a series of policies have been implemented.

Looking at the first aspect, whether this time's policy can continue. In the view of "Node Finance," unless there is a significant change in the external environment, such as the Federal Reserve suddenly not cutting interest rates again and even turning around to continue raising interest rates, otherwise, there is basically no possibility of turning around such a significant policy "combination punch."So, is it possible for the Federal Reserve to feint and turn again?

During the holiday period, on October 4th local time, the U.S. Department of Labor released the latest non-farm employment data, which was surprisingly strong. The data showed that non-farm employment increased by 254,000 people in September, far exceeding the market's expectation of 150,000 people, with a deviation of over 50%.

The release of this data caused a significant plunge in the exchange rate of the Chinese yuan against the U.S. dollar, and the price of gold also fell accordingly, with the U.S. dollar strengthening once again. There is a renewed voice in the market that the pace of the Federal Reserve's rate cuts will slow down, and it may even turn around and raise interest rates again.

In fact, behind this move by the Federal Reserve, it is not ruled out that they have seen a sudden surge in China's A-shares, with global capital looking bullish on Chinese assets, causing their own disarray. The extent of the non-farm data is enough to make Wall Street analysts lose face.

However, our country released a series of policy "combination punches" after the Federal Reserve cut interest rates by 50 basis points in September, which must have taken into account the Federal Reserve's subsequent monetary policy. Now, the Federal Reserve is in a dilemma, and interest rate cuts have become a general trend, which cannot be reversed in the short term.

Therefore, subsequent policies can maintain an optimistic attitude. Our country's macro policy adjustments have always been long-term and stable, and there is no turning back once the bow is drawn.

If you still don't have a bottom in your heart, you can continue to observe. Among them, the specific implementation of fiscal policy is the core observation index, such as the increase in the deficit ratio, the issuance of special government bonds, etc., which may become the policy window period in October. In addition, there is the optimization of real estate policies, and finally, the implementation and spread of policies to promote consumption. It is optimistically estimated that the support of subsequent fiscal policies will continue to increase, providing new vitality for the consumer market.

In this regard, on October 7th, Goldman Sachs released a research report titled "When not to fight, when to wait? The top ten reasons to be bullish on the Chinese stock market", which made a comprehensive analysis from multiple aspects such as the shift in macro policy, the valuation of Chinese assets, the prospects of corporate earnings, and the interest rate cuts by the Federal Reserve.

Goldman Sachs is the leader among foreign investment banks, and the release of such a research report at this time has already shown that this round of the market will not easily turn.

At this stage, we need to observe the other side of the subsequent market, that is, whether the economic fundamentals are starting to improve. This is the key to whether the market can continue to strengthen and rush to 6,000 points or even tens of thousands of points.03 3600 points, not yet the peak?

Regarding the economic fundamentals, we maintain a single stance: a definite improvement.

If the targets are not met, the policy front will continue to stimulate until there is an improvement. This is because it is evident that our country has chosen the stock market as the main battlefield to drive the economy and invigorate the liquidity of funds. On this battlefield, there is no other choice but to push it up.

This is not blind mindless confidence, because looking around the world, from Europe to the Middle East, from Africa to the Americas, after the Federal Reserve opened the interest rate reduction channel, can global capital find a better value lowland than China's A-shares?

The answer is, no.

Moreover, even though China's economy is in a period of adjustment, the GDP growth rate remains around 5%, and more importantly, against the backdrop of global turmoil and conflicts, China has sufficient strength to ensure its own safe and stable continuous development.

It is also worth noting that on September 25th, the day after the start of this round of market movement, our country's Rocket Force successfully launched a Dongfeng-31AG intercontinental strategic missile into the relevant public sea areas of the Pacific Ocean.

This can be seen as an invitation from China to global capital, telling international funds not to have any concerns.

Therefore, returning to the question at the beginning of this article, how long can this round of market movement last? No one can predict the specific time, but it can be affirmed that this will be a historical level of major market movement, and 3600 points are far from the peak.

Now, the overall market valuation of A-shares is still at a low level, and investors' enthusiasm has been completely ignited, with running to get on board becoming the main tone.We do not provide specific sector or stock recommendations, and stock selection is no longer as crucial as it once was. What truly matters is not getting thrown off the fast-moving bull market, as past experiences have taught us that the market will inevitably face some bumps along the way. In the future, while there may be some short-term technical adjustments, the overall upward trend of the market will remain unchanged.

Get on board, hold on tight; it's easy to be thrown off in a bull market.