Opening the software in the morning, Hang Seng stock index futures fell 1.6% overnight. Returned to the lowest point before the rebound overnight, and my heart suddenly cooled.
Looking at the European, American and Asia-Pacific markets again, my heart is even colder......
Speaking of the United States, the trading market generally expects the probability of an interest rate cut in September to be close to 100%, but the market has fallen sharply, what is going on?
First, I feel like my mentality is going to explode
Let's look at the specific market data first.
Last night's night, the United States and Europe were falling sharply with a giant hammer. The Nasdaq was the lowest hammer at 3.1%, and the S&P 500 also fell 2%. In addition, in the Asia-Pacific region, the Nikkei 225 and the Korea Composite Index are 5% and 3% respectively.
Source: iFind; As of August 2, 2024
To be honest, I felt quite sad at the time.
You said that we finally increased our energy and rose the long white line, and we were about to rebound, and we were broken again.
The key is that when others rise, we don't rise. And it's not like once or twice! As if he was staring at us......
In addition, the PMI data fell in July.
According to the National Bureau of Statistics, the manufacturing PMI recorded 49.4 in July, down 0.1 percentage points from the previous month, and was below the boom and wither line for three consecutive months, with weak data.
However, today's A-share performance is better, better than I expected.
The CSI 300 fell 1% on a broad basis. The small and micro market broad base, which represents most companies, originally turned red quickly and had a good trend, but unfortunately collapsed in the afternoon, but the CSI 2000 closed down 1.3% is not too much.
Source: iFind; As of August 2, 2024
Let me summarize with you:
The domestic economic data in all aspects is weak, and the international environment is not good, so it is difficult for A-shares to usher in a reversal in the short and medium term. But after all, the point is very low, and you can lay out a rebound. Or light the large-cap index and dig more into the structural market.
Be cautious and do some defensive strategies.
Anyway, I wrote a little book some time ago: "My Defensive Investment System". Although the number of pages is not large, and the content is relatively short, there are no empty words or clichés, all of which are my personal investment feelings. Need to kick me in the background.
2. 100% interest rate cut! Why did the world collapse?
At present, the most confusing thing may be the rise in interest rate cut expectations, and even the Lao Meina trading market generally expects the probability of an interest rate cut in September to be close to 100%, but the market has fallen sharply, what is going on?
Judging from the Nasdaq index, from November 2021 to the end of 2022 after the epidemic, the Nasdaq fell from 16,000 points to about 10,000 points, a decline of 30%. But artificial intelligence AI was born, and the Nasdaq reached 18,000 points......
The various tech giants are even more excited, generally multiplying several times.
Indeed, artificial intelligence AI has great business prospects. But the implementation is not overnight, it may take 10 or 20 years. Compress the market of 10 years and 20 years to the extreme group within two years, and what will you do in the remaining eight or twelve years?
I also took stock of the historical trend of the S&P 500 and CSI 300 before and after the Fed's interest rate cut cycle, and the actual data is as follows.
Let's take the S&P 500 as an example:
In the past 30 years, several rounds of interest rate cut cycles have seen a downward trend before and after the rate cut, and then rose.
Source: iFind; As of August 1, 2024
For example, 10 months before the real rate cut in August 2019, the S&P 500 corrected at the end of 2018, falling -20%, and then rising.
For example, one month after the interest rate cut in September 2007, the subprime mortgage crisis and financial crisis swept the world, and the S&P 500 fell -60% and then rose.
For example, three months before the interest rate cut in December 2000, the market was high, the dot-com bubble burst, and the S&P 500 fell by -50% and then rose again.
And in October 1998, three months before the Fed actually cut interest rates, the S&P 500 fell by more than 20% and then rose.
Let's take the A-share CSI 300 as an example:
I found that the Fed's interest rate cut does not mean that A-shares will rise, but that it will lag depending on the point and valuation.
If it is at an all-time high, such as in 2007, it fell sharply.
If it is at a historical low, such as 2009 and 2020, it may continue to fall for some time before it comes out of a better rally.
Source: iFind; As of August 1, 2024
To sum up: Regardless of A-shares or U.S. stocks, the Fed's interest rate cut does not mean that the market is rising.
Rather, it is a measure of the point at the time, valuations, and perhaps even a historic plunge before a rise. There is also a certain lag in the rhythm of time.
In the final analysis, we need to return to investment common sense, believe in the pendulum theory, mean reversion, rise and fall, time for space, etc.
In terms of operation, according to the current point and valuation, priority can be given to the allocation of low-level and undervalued Hong Kong stock funds and A-share funds, supplemented by overseas funds.
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Disclaimer: The content of this article is based on public information research and does not constitute investment advice. Investors should make prudent decisions and bear risks independently.
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