Summary of Key Points
This is a market analysis rated three stars, aimed at ordinary investors, with a generally cautious tone. It neither advocates for an immediate bull market nor predicts a sharp market downturn. The analysis primarily clarifies two common misconceptions among retail investors: First, many believe that after a long period of decline and the release of all bad news, a significant rebound is imminent, but in reality, this small rebound lacks sustainability and will eventually lead to a decline. Second, although the international situation appears calm, various conflicts are in a latent stage, accumulating momentum for future actions. The uncertainty in the coming months is extremely high, so it would be better to focus on defensive sectors with high certainty rather than chasing hot topics in the hope of market gains.
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Detailed Analysis
1. Why is the notion of “all bad news being released” an illusion? The market's opening higher but closing lower already provides the answer
A few days ago, many investors noticed that the A-share market, as well as the stock markets in Japan and South Korea, opened higher, and the U.S. market also stopped its three-day decline due to slower employment growth in the U.S. They concluded that the Federal Reserve would not dare to raise interest rates in September, and that the time to buy on dips had arrived. However, all markets ended with a downward trend. The A-share market even lost all of its gains for the day. This indicates that such minor positives were not enough to drive a major market movement. First, the employment data is just a reference; the key non-farm payroll data, which determines the Fed's interest rate decisions, has not yet been released, so claiming that rates will not rise is purely speculative. Second, two major issues affecting the global market remain unresolved: The yield on U.S. long-term bonds remains high, offering risk-free returns, which discourages investors from entering the stock market. Additionally, international oil prices remain at $90 per barrel. Although there were hopes that Venezuelan oil would lower prices, it will take half a year to a year for that oil to hit the market, so inflationary pressures remain, and the threat of Fed interest rate hikes persists.
2. Is the U.S. trying to repeat the “Plaza Accord” strategy against China? The conditions are not right this time
At the G20 summit, the U.S. led accusations that China has a large trade surplus and is competing with local businesses by selling its products globally, suggesting a significant appreciation of the RMB. This is a repetition of the strategy used against Japan in the 1980s, when the U.S. forced the yen to appreciate sharply, causing Japanese exports to collapse and leading to a prolonged economic downturn. However, this approach is ineffective against China. China is now an equal partner, and the Chinese central bank has clearly stated that the RMB exchange rate will be determined by market forces, without irrational fluctuations. While the RMB may appreciate gradually, it will not experience the sudden surge in the yen's value that destroyed Japan's economy. Ordinary investors should not be influenced by panic rhetoric online.
3. The biggest hidden risk: Potential dramatic changes after the U.S. midterms
Why haven’t various conflicts between China and the U.S. erupted yet? It’s because the U.S. is in the midst of midterms, and all parties are focused on gaining votes. Extreme policies are still being planned and not yet implemented. Once the elections in November are over, these issues will likely surface, such as the reinstatement of additional tariffs and further restrictions in trade and technology areas. The market has already anticipated this risk, which is why there is no momentum for a rise. Even the South Korean government’s efforts to stabilize the market by investing in chip stocks with foreign funds failed to boost prices, indicating a cautious market sentiment.
4. Avoid high-risk hot topics like AI; more stable sectors are safer
The liquidity in the A-share market is clearly shrinking: “Risky funds” that used leverage to invest in stocks have withdrawn $5.5 billion in a single day, and trading volumes have dropped to below 1.8 trillion, hitting a new low. Both retail and institutional investors are avoiding risks. sectors like AI and hard technology, which were once driven by speculative capital, are now losing momentum as that capital withdraws. These sectors lack the sustainability for continued growth, and ordinary investors could easily become the ones to bear the losses. Instead, funds are flowing into more stable areas with high certainty, such as agriculture (a defensive sector), insurance and securities (which have low valuations and are less volatile), and power grid equipment (a sector with simultaneous domestic and international demand).
> Risk Warning: The above analysis is based on market logic and does not constitute investment advice. The stock market carries risks, and investors should proceed with caution.