In the past week, many significant events occurred: the Federal Reserve’s second interest rate cut, the market repeatedly surpassing 4000 points, and the meeting between the leaders of China and the United States, which made substantial progress in trade disputes. However, it was also a week with extremely high operational difficulty! Most people made profits on the index but lost money.
Current market characteristics:
Firstly, there is a collective correction in AI hardware, which has been heavily supported by institutions at high levels. The main reason is that the third-quarter reports generally fell short of expectations, and after a previous counter-trend rise, valuations have become very high. The capital that has exited has chosen directions such as solid-state batteries and innovative drugs, making a wave of high-low cuts. This also shows the frequent rotation of sectors in a volatile market: last week we were discussing the domestic substitution of AI hardware, and this week we faced a double whammy of performance and valuation. Can you keep up with this rhythm? During the earnings report period, the rise in individual stocks, valuations, and performance must be key points of focus.
However, this does not mean that AI hardware is no longer viable. The construction of AI hardware holds a fundamental position in the entire technological development; it is the new infrastructure of the technological era. It is also a key area where the U.S. is trying to restrict us, and we must make breakthrough progress in this critical industry within three to five years. Self-controllable technology, led by chips, remains the main line of the main line.
Secondly, Sino-U.S. trade is expected to enter a relatively calm period for a year. Many people may still worry about the unpredictability of the former president, who says one thing and does another. In the coming year, the former president may still have some fluctuations, but it will not be as erratic and grandiose as before. His unpredictability is partly due to his personality, partly due to the constant search for negotiation leverage, and partly to balance the interests of various political forces domestically. After half a year of negotiations, the U.S. has realized that they cannot do much to us in the short term; they may harm 1000 but damage themselves by 800. The ‘correct way to coexist’ is something the U.S. should now understand; even if there are fluctuations, they will be minor ripples that cannot change the overall framework of the Busan meeting.
In the next three to five years, it is highly likely that there will be a relatively peaceful trade environment, with both sides secretly addressing their shortcomings. The competition between China and the U.S. has shifted from overt confrontation to a competition of each side strengthening their weaknesses.
This week, the major concerns have been resolved, and the market will enter a brief period of calm. The focus will shift to our internal policies.
In the coming period, pay more attention to companies with a high proportion of exports, high-quality small and medium-sized chip companies, innovative drugs, and commercial aerospace; it is essential to manage positions well, primarily maintaining light positions. For those with high trading levels and risk tolerance, do not exceed 50% of positions. Until significant breakthrough signals emerge, treat everything as a fluctuation.
Narrow fluctuations at high levels are more likely to lead to losses.
As always, do not get overly excited.