A-Share Slides 1.07%: Is Dawn Coming?

Yesterday, the broad market index fell again by 1.07%. This week, with two consecutive large bearish candlesticks, the A-share market seems intent on cooling us down. I opened my account to find that ...

Yesterday, the broad market index fell again by 1.07%. This week, with two consecutive large bearish candlesticks, the A-share market seems intent on cooling us down. I opened my account to find that my fund account has accumulated a loss of over 15% this year. After a year of being battered by the market, the market is still worrying as the year-end approaches, and the legendary year-end rally is nowhere to be seen.

Personally, facing the volatile market conditions of this period, my emotions have been fluctuating, but I have been persistent with my fixed investment in funds. On one hand, historical data repeatedly shows that the A-share market index at 3000 points is valuable and should be cherished, and it is necessary to control one's irrational panic. On the other hand, I firmly believe in the overall direction of the A-share market and consider that the current market is in the darkness before dawn.

I have several reasons for this:

Firstly, looking at the market conditions of the past two days, although the market has fallen, the trading volume is not high. Yesterday's market trading volume was only 640 billion yuan, which is a volume contraction decline, and the selling pressure is not strong. Moreover, the main sectors that fell in the two markets are those that have recently risen very quickly, such as liquor, which has risen nearly 30% from the deep pit of the second bottom, and already has a pressure to adjust.

Secondly, positive signals from high-level economic meetings at the end of the year are continuous. This meeting is mainly to set the tone for economic development in the coming year, similar to a year-end summary and outlook for the coming year, and has a guiding role. The core content of this meeting is "stabilize growth, expand domestic demand, and boost confidence. Support consumption such as housing improvement, new energy vehicles, and elderly care services." Simply put, it is about making money and developing the economy.

Looking at historical data, the tone set by the economic meetings each year can be reflected to some extent in the performance of the A-share market. For example, the 2020 economic meeting clearly stated, "In 2021, we must vigorously promote scientific and technological innovation and solve the bottleneck issues in the industrial chain, strengthen the policy of 'housing is for living, not for speculation,' resolutely promote carbon peak and carbon neutrality, strengthen anti-monopoly and prevent the disorderly expansion of capital." And indeed, the A-share market performed in this way that year. Sectors related to carbon neutrality and scientific and technological innovation soared, while real estate, internet platform, and consumer sectors led the decline.

Looking at the tone set by this year's meeting, with the relaxation of the epidemic, the economic recovery in 2023 is a foregone conclusion. Moreover, this year's economic data base is relatively low, and the economic growth rate next year will be quite considerable. As a barometer of the economy, the stock market's performance will not be bad either.

Thirdly, the current A-share market is quite cheap. I always believe that the investment cost-effectiveness of the A-share market at 3000 points is very high. Currently, the market valuation is lower than 77% of the historical time, similar to the market cost-effectiveness in February 2019. Investing in the A-share market at this time has a high probability of market fluctuations and subsequent increases.

Faced with the volatile market, I try to collect as much information as possible to make a rational judgment about the market to guide my investment practice. Of course, as a small investor, my ability to judge the market is very limited. I still have questions about the market: Can the economic indicators for the coming year be achieved as scheduled? And can they drive the stock market to fluctuate and rise?

However, the essence of investment is to accept uncertainty, and we can only choose to do things with a higher probability. No one has the answer to whether the A-share market will rise or fall next year, as long as the probability of it fluctuating and rising is high, I will continue to bet. The current market for me is the darkness before dawn!