At the darkest moment of the market, I would like to look back with my brothers on how we came through the bear market in 2018.
Taking the All-A Index as a starting point, 2018 is the second largest bear market in the past 20 years after 08, like this:
Of course, if you count the decline so far in 2022, it is a bear market that is even bigger than 2018.
Although I have experienced it myself, I found that the situation back then was also quite confusing.
Back in early 2018, the market was quite optimistic.
Because in 2017, the GPD growth rate of the mainland was 6.9%, which was the first acceleration in the past 7 years, like this:
At the beginning of 2018, the market was full of expectations for a "new cycle" and "reflation", and it was expected that a new round of the global Jugra cycle would begin to appear, but the expansion did not come as expected.
What is really coming is a few grand narratives that run throughout the year:
The first is the outbreak of the great power game between China and the United States, the second is the continuous promotion of domestic deleveraging, and the third is the mismatch of the economic cycle between China and the United States, and the Fed's interest rate hike cycle - how similar to the current one!
Let's talk about them one by one:
✔️2018 got off to a good start, but U.S. stocks fell sharply at the beginning of the year, and the market began to expect the Fed to raise interest rates.
✔️The Sino-US trade friction began in March, followed by several tariff increases, negotiations, re-introduction of tariffs, and escalation of the trade war, which continued to dampen the market's risk appetite.
✔️ Then there is the promotion of deleveraging policies, the implementation of new asset management regulations, and the increase in credit bond defaults.
✔️In 2018, the economic and financial cycles of China and the United States were mismatched, the U.S. economy accelerated its improvement, and China's economic momentum slowed down.
The Federal Reserve raised interest rates 4 times, and our central bank cut the RRR 4 times during the same period, and the cyclical mismatch made A-shares further unattractive.
Now, this mismatch is accompanied by the Fed's violent interest rate hikes, which are even more extreme than in 2018.
✔️ After the bear market bottomed out, foreign capital began to flow in sharply, and we were copied by foreigners - I personally hate this kind of self-degrading rhetoric, but domestic funds are indeed disappointing.
✔️In September 2018, the policy appeared at the end of the year, and it began to frequently send out warm winds to care for private enterprises, the private economy will not leave the scene, and the property rights of private enterprises are inviolable.
According to the experience of bear markets, there are valuation bottoms and market bottoms after policy bottoms.
After the 11th holiday, the market style changed abruptly and entered the stage of killing and making up for the fall, and the original relatively resistant food and beverage and pharmaceutical sectors quickly made up for the decline, especially the Moutai drop limit on October 29, which can be called a famous scene of A-shares.
✔️In November, a symposium on private enterprises was held to unswervingly encourage, support, and guide the development of the non-public economy.
✔️In December, China and the United States reached an agreement to cancel the tariffs imposed since the beginning of this year, so as to bring bilateral economic and trade relations back to normal as soon as possible.
Entering Q4, many institutions and big Vs have repeatedly written articles calling for optimism, reminding everyone that the market has entered the bottom area.
The worst in 2018 should be the GEM, which fell for 3 and a half years from the high point in mid-2015, with a cumulative retracement of 70%.
Since the high point in July 2021, the GEM has retreated by more than 50%, and the valuation level is on par with that at the end of 2018.
In 2018, the average daily turnover of A-shares was only more than 200 billion yuan at its lowest, and in this environment of reducing the amount of money, the small- and mid-cap style, which is more sensitive to liquidity, performed poorly and significantly underperformed the broader market.
Finally, 2018 ended in a full-scale bear market, and all sectors and industries were spared.
As shown below, on the far left:
However, the continued decline at the beginning of 2019 is even more torturous, and it also makes the people who stand on the side of high probability and shout that the stock market has bottomed out in 2018 become clowns-
Similar plots have happened many times in the history of A-shares, and it seems that the bottom always has to slap everyone's face and break everyone's bottom line before giving up.
This also makes the mentality of shareholders always experience:
Believe it again, never believe it again, and play Lao Tzu with Rinyima!
Mourning is greater than heart death, perhaps the greatest sorrow of a bear market, which will erode a person's confidence.
After the Spring Festival in 2019, without any positive stimulus, the GEM index pierced the clouds.
By April 2019, A-shares had become quite manic FOMO, and investors who had gone short bought in anxiety.
In the following two years, the ChiNext index more than doubled.
Unlike the sharp fall and panic in 2018, this round is more like a long despair:
The great bear market in 2022, the expected difference in 2023, and the effect of the whole year of 2023 fell out in the first half of 2024.
Xu Yan, a fund manager I like very much, only wrote a few words in the latest 23-year quarterly report, mainly one sentence:
In the already narrow space of the stock market, some magical concepts appear like magic, so that only magic can grasp them, while other primitive concepts have begun to gradually become magical.
"All this is not a dream, it is a reality that cannot be woken up". Before you know it, time has passed again.
Now we are once again mired in linear extrapolation of unfalsifiable grand narratives.
However, all grand narratives have many pitfalls and variables, and it is better to trust valuation and common sense than to believe these claims.
起码，事后看，估值都没说过谎——
Whether at the end of 2018, at the beginning of 2021, or now.