Over the weekend, there was widespread discussion about the new round of tariff wars. I found that most people are not concerned about what actually happened, but rather two things: how much the market will drop on Monday; and whether they should increase their positions.
The problem is, if we don’t carefully study what happened, these two questions cannot be answered. I feel that people generally have one thought: I don’t know what’s going on, but I definitely won’t cut my losses, otherwise, I will become the fool from April 7.
In my view, this time is an accidental conflict arising from regular friction between both sides. First of all, this is not an offensive move; rather, it is a countermeasure against the industry sanctions imposed by the U.S. Department of Commerce’s Bureau of Industry and Security at the end of September. At that time, the bureau issued a document stating that the subsidiaries of Chinese companies on the entity list would also be sanctioned. We believed they were stirring up trouble, so we retaliated. The retaliation was not significant; we just added five new rare earth elements that we would regulate. At this stage, both sides were engaged in tactical friction until President Trump escalated the situation.
This incident resembles a misunderstanding. His tweets were filled with accusations against us, claiming that we inexplicably tightened rare earth regulations. We also felt innocent; didn’t the U.S. know what it was doing? I think Trump may not have been aware of what the Bureau of Industry and Security was doing.
The U.S. has always had two bureaucratic systems. One is the presidential team, and the other is the bureaucratic team composed of various departments. The presidential team is the one we are in conflict with, and this struggle has both tension and relaxation. The other team operates methodically against us; that bureau adds Chinese companies to the entity list every year, and the number has been increasing in recent years. Moreover, they do not report to the president about how many companies are on the list or when they are added. This means that the U.S. lacks a policy consistency evaluation system.
In this model, both China and the U.S. believe they are innocent. In this situation, although the conflict has intensified, it is not difficult to ease tensions; there is room for both sides to mitigate the impact through mutual explanation.
Thus, the event itself is not serious, and the general memory of investors being 4.7 leads to the same conclusion. The former points to a de-escalation of the conflict, while the latter indicates that not many people will cut their losses, so the stock market is likely to not drop significantly on Monday.
On the other hand, the fact that it may not drop significantly has an awkward effect, which is that there may not be a good position to increase holdings. It is best to maintain the current positions on Monday.
Overall, the market’s profit opportunities are not as good as they were in June to August.
Recently, I have been studying domestic semiconductor equipment and will continue to learn. In the next three years, there may be an “innovative drug moment” for domestic semiconductor equipment.
Today’s article will not cover technical analysis; the technical patterns of stocks and bonds on Monday are likely to change significantly, so we will see. It is not clear at the moment. Just from this Friday’s chart, stocks are expected to drop in the short term, while bonds are expected to rise in the short term. However, there is a possibility that the short-term trend could change all at once on Monday, so we will see.