Undoubtedly, in the current economic environment and public opinion atmosphere within China, there is a strong and evident speculative flavor permeating.

Due to the skyrocketing stock market, it is natural that the envious, the followers, and those who want to enter the market have increased.

Because of the restlessness in the real estate market, various forms of hype and noise have also begun, so more and more developers and landlords have become restless, with price increases, price jumps, and back-and-forth negotiations becoming a continuous spectacle, of course, this is currently limited to first-tier cities.

Under the speculative atmosphere, many people feel as if money is falling from the sky, who wouldn't want to grab a handful?

This is the fatal charm of cycles: for the vast majority of post-95s and post-00s born and raised domestically, this may be the first time they encounter and experience such a noticeable and thrilling bull market atmosphere.

In the past few rounds, they were either too young or most likely did not have autonomy and sufficient understanding of the economy.

But times change, markets change, and many essences of human nature remain eternal.

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In an economic society, talking about money is not vulgar; as long as there is a noticeable money-making effect, there is no shortage of human pursuit and convergence in any era.

This article is written after experiencing a magical surge during the week of the National Day holiday, during the market closure phase, where transactions are impossible, and even the strongest desires cannot be released. This is the best time to learn from history, to see what past market performances and experiences can bring in terms of inspiration and warnings for the upcoming bull market.

1Reviewing the Characteristics and Commonalities of the Last Two Bull Markets in the Chinese Stock Market: What Should Be Paid Attention To?

From 2014 to 2024, over a span of 10 years, excluding the 2024 market trend, there have been two relatively typical bull markets in China's domestic financial market:

The first one was from July 22, 2014, to June 12, 2015: Leveraged Bull Market

This bull market started from 2,000 points in July 2014 and rose to a peak of 5,178.19 points in June 2015. The index increased by more than 150%. In terms of pattern, the rise lasted for four rounds.

During the period from 2014 to 2015, the quarterly growth rate of China's domestic GDP showed a significant decline, falling from 7.9% in the first quarter of 2013 to 6.9% by the end of 2015; in terms of inflation, the GDP deflator index once again approached 0.

Valuation: On July 22, 2014, the price-to-earnings ratio (TTM) was at 1.78% of the 10-year range (from July 22, 2004, to July 22, 2014).

Technical Analysis: It had been five years since the high point of the 2009 bull market.

Policy: On May 9, 2014, the State Council issued "Several Opinions on Further Promoting the Healthy Development of the Capital Market" (referred to as the "New Nine Articles"), followed by the China Securities Regulatory Commission (CSRC) issuing the "Administrative Measures for the Issuance of Shares and Listing on the Growth Enterprise Market" and the "Interim Administrative Measures for the Issuance of Securities by Listed Companies on the Growth Enterprise Market". In November 2014, the Shanghai-Hong Kong Stock Connect pilot was launched.

The expansion of margin trading targets brought incremental funds to the market: Starting from 2010, the margin trading targets have been gradually expanded. In 2014, the number of margin trading targets increased to 900, and the participation threshold was reduced from 500,000 to zero, providing a large amount of leveraged funds to the market.From November 22, 2014, to October 23, 2015, after five interest rate cuts, the benchmark interest rate for one-year RMB loans decreased from 5.60% to 4.35%.

Round Two: January 4, 2019 - February 18, 2021: Core Asset Bull Market

This was a minor bull market, with the market rising from 2,440 points to 3,731 points, an increase of 50%.

Fundamentals: From 2015 to 2018, the domestic GDP quarterly growth rate remained between 6% and 7%. In 2020, the growth rate declined due to the impact of masks.

Valuation: In January 2019, the Shanghai Composite Index's price-to-earnings ratio was about 11 times, equivalent to the 22nd percentile of the P/E ratio range over the past 10 years.

Technical Analysis: The market had been declining for three years.

Policy and Capital Market:

To counteract the impact of the COVID-19 pandemic, the country introduced a series of economic stimulus policies. From 2019 to 2021, the central bank consecutively lowered the reserve requirement ratio four times, from 13.5% to 11.5%, with a cumulative reduction of 200 basis points. From 2019 to 2021, the central bank consecutively cut interest rates three times, from 3.3% to 2.95%.

On April 27, 2018, the People's Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, and the State Administration of Foreign Exchange jointly issued the "Guiding Opinions on Regulating the Asset Management Business of Financial Institutions" (referred to as the "Asset Management New Regulations"). The "net value management" and "breaking the rigid payment" had little impact on public mutual funds, which were already net value products. At the same time, there was an increase in funds entering public mutual funds due to the "deposit migration" phenomenon.

The scale of public mutual funds grew rapidly: The scale of public mutual funds increased from 12.92 trillion in 2018 to 25.44 trillion in 2021.How to view this round of increase?

Fundamentals: GDP growth rate is in a downward process, entering a contraction cycle.

The GDP deflator has been negative for five consecutive quarters.

Valuation: In mid-September, the price-to-earnings ratio of the Shanghai Composite Index is equivalent to the 5th percentile of the P/E range over the past three years.

Policy and capital aspects:

Since the State Council Information Office held a press conference on September 24 to "introduce the situation of financial support for high-quality economic development," a series of strong stimulus policies have been introduced, including interest rate cuts and reserve requirement ratio reductions, especially targeted stimulus policies for the stock market.

In addition, the Federal Reserve also announced a rate cut. Entering a rate-cutting cycle.

Comparison of 3 bull markets shows:

1. The fundamentals are not very good,

2. The stock market valuation is very cheap,3. Monetary policy is very loose.

There is an interesting set of data: the blue line represents the dividend yield of the Shanghai Composite Index, and the yellow line represents the yield of 10-year government bonds. From the end of 2022 to 2023, the dividend yield began to approach the level of the 10-year government bond yield. In 2024, the dividend yield exceeded the bond yield, which means that from a portfolio allocation perspective, stocks have become a more "high-quality" asset.

Overall, the fundamental logic of the three bull markets is the incremental allocation of low-valued assets driven by capital.

If we do not consider the fundamentals, the trend of this round is likely to be the same as the previous two.

2

Strategy Analysis: What insights are worth paying attention to in the face of this bull market?

Firstly, there is an essential aspect to the current bull market:

Due to the current economic cycle in China being in a relatively difficult period, everyone sees the stock market as an opportunity to make quick money, rushing in recklessly in the hope of making a fortune in the market to resolve their current difficulties.

Without discussing the market trend and subsequent possibilities, isn't this essence painfully real?Most normal, healthy bull markets are generally born after the economy improves, rather than during economic downturns. For example, in 2005, there were fewer opportunities to make money in the economy, and real economy profits were not as high as those in the capital market, so short-term funds flooded into the stock market with continuity. Moreover, the current market is completely different from the past, and blind comparison can easily lead to the mistake of "marking the boat to seek the sword."

Secondly, the routine of selling anxiety has become the norm. At present, in addition to the voices of bull market, the voices of missing out are also everywhere. Even Li Daxiao has come out and publicly said that the pain of those who miss out is 1000 times that of those who are stuck! Some people say that this time the institutions missed out, and some say that foreign institutions collectively missed out, and now they are all scrambling for chips. Some people also say that there are queues everywhere to open accounts, and new leeks are taking money to enter the market.

There are also discussions about the three stages of the bull market and specific exit strategies, which are quite impressive. Some people are talking about the operation strategies of the bull market and the rotation rules of the bull market sectors. Anyway, the subtext is just one sentence: if you don't come, you will miss out, missing out will result in a huge loss of money, and it's still in time now.There is a group of people who deliberately create conspiracy theories, such as preventing foreign capital from bottom-fishing, smashing short sellers, and the Sino-American financial war, using national empathy to attract investors to enter the market.

If hope is the bait of a bull market, then fear is the hook, making full use of human jealousy and greed, trying to use fear to self-validate.

It's hard not to be anxious after hearing these things, and once people are anxious, they often lose their rationality.

Then, according to the rules and experience, many new stories will emerge in the domestic financial market.

In a speculative market and atmosphere, what is not lacking is stories. A company suddenly has some major patents, or suddenly becomes a supplier to someone, and so on.

Think about how LeTV and 360 Technology became the focus of the market, how they raised expectations and stock prices by telling stories.

In a crazy speculative market, sometimes there is no need for solid facts as a basis, fabricating and boasting may be a bit cumbersome, just a small composition can complete the harvest.

Finally, in a bull market, you will definitely regret not participating, but never have the mentality of gambling your fortune for a try.

Taking profits is the most deceptive ghost talk in the world, because basically no one can do it.

The vast majority of people will basically become the victims of the inevitable crash after the surge.In the end, stock trading is essentially about human nature.

Veteran investors with over a decade of experience should resonate deeply with this statement.