Yesterday, in the article I wrote, I mentioned that "the current A-share market has little room to fall and a lot of room to rise." Some fans commented, "Many articles expect that the market will have little room to fall and a lot of room to rise this year. However, when the market forms a consensus, the expectation often does not come true."
In the past, some fans have also made similar comments. The general idea is that "when the market is optimistic, it is difficult for the market to rise. When the market is pessimistic, it is difficult for the market to fall."
Last year, when I predicted pork prices, some people also commented, "Everyone has predicted your prediction, so your prediction cannot be correct."
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Originally, I just laughed at this kind of view. It was only this year that I found that many friends have similar investment concepts. I think this investment concept is problematic, and it is necessary to discuss the issue of "market expectations" today.
I have been considering a question more than 20 years ago - is the buying and selling behavior of retail investors always wrong?
Many people believe that the operational behavior of retail investors is always wrong. Even by doing the opposite according to the behavior of retail investors, you can make money. Is this really the case? I can be sure that if you do the opposite according to the operations of most retail investors, you still can't make money. If you don't believe it, just try it.
Because, 20 years ago, I conducted a lot of observations and found that the collective behavior of retail investors is not always wrong. On the contrary, the correct times are far more than the wrong times.
At that time, I was in the retail investor hall every day, observing their operations and speculating on their psychological dynamics. I found that retail investors are correct in most of the time in judging the market, but they are prone to misjudgment at the top and bottom of the market. Although there are only two mistakes, these two are the most fatal! This is the reason why retail investors lose money.
For example, the market started to rise from 1000 points to 1200 points, 1400 points, 1800, 2000, 3000, 4000 points. Between 1200 points and 4000 points, countless retail investors flocked into the market, and their judgment of the market was not wrong. At points such as 1400 points, 2000 points, and 3000 points, many retail investors reached a consensus, and many retail investors were optimistic about the future market. The market did not become the top of the market because of their unanimous optimism. If the market stopped abruptly because there were too many optimistic people, then the market might have stopped at 3000 points, and there would be no subsequent 6124 points.For everyone's better understanding, let me give a more obvious example.
A stock opens at its upper price limit, and the next day, the day after that - all the way to the ninth day, it opens at a one-word upper price limit. What is the reason for this? This is a clear market consensus to be bullish! The market expectations are so consistent that it leads to very few sellers and a large number of buyers, resulting in a continuous nine days of opening at a one-word upper price limit.
From the first day to the ninth day, it is a one-word upper price limit opening, and the market expectations are consistently bullish. However, such consistent market expectations did not prevent the stock from rising continuously for nine days. If we follow the view that "consistent market expectations will lead to unmet expectations," then this stock would not have a one-word upper price limit at all, let alone nine consecutive one-word upper price limit boards.
What do I want to say? What I want to say is that using "consistent market expectations" to judge whether the market can become a top or bottom is wrong. At least other factors need to be combined to judge the top and bottom of the market. The condition of "consistent market expectations" itself does not have the ability to judge the rise and fall of the market and the top and bottom alone.
After the market entered the top in 2015, it began to plummet, and the market began to panic. Many stocks opened at a one-word lower price limit every day. At this time, the market reached a consensus, and people unanimously believed that the market had entered the top. People competed to sell stocks at the lower price limit every morning, and due to the lack of buying orders, the market opened sharply lower for several consecutive days, but it did not stop the stock market because of the consistent market expectations. Finally, the national team intervened with trillions of funds to support the market, and the stock market slowly stopped falling.
Market expectations do help us judge the market to some extent, but we cannot judge the market solely based on market expectations, let alone regard market expectations as the most important factor in judging the market.
What is the most important factor in judging the market? It is capital and valuation.Capital:
For example, in 2015, the national team used trillions of funds to support the market, forming a bottom. Additionally, the number of stock accounts opened on exchanges is directly related to the rise and fall of the market. The large-scale issuance of funds provides momentum for the market. Leveraged capital causes significant market fluctuations. These are all major impacts of capital factors on market trends.
Valuation:
At the bottom of each round of market trends, a large number of stocks will fall below net assets, and the overall market P/E ratio is at a historical low.
In summary, to determine the direction of the market, it is necessary to make a probabilistic judgment by synthesizing various factors such as market valuation, capital, policy, economic conditions, interest rates, market expectations, foreign exchange, and so on. It is difficult to make the correct judgment by only applying one or two of these factors.
Taking the current A-shares as an example, the current A-shares are at the bottom in terms of valuation because the valuation of most sectors is at a historical low, which is a fact. Valuation will not change because of the consistency of expectations. Just like a piece of gold, it will not become brass because most people agree that it is a piece of gold. Nor will it become a clod of earth forever because people do not recognize it as gold. No matter whether the market expectations are consistent or not, it is gold. Regardless of the current market expectations, the majority of A-share sectors are in a historical low valuation area, and it will not change.
Since the current A-shares are in a historical undervalued area, if there is an inflow of capital and an improvement in the economic environment in the future, A-shares are very likely to explode a bull market trend under the joint force.
But why do we see the market trend falling sharply when the market expectations are unanimously optimistic?
This is because the market valuation was high at that time, coupled with the emergence of unexpected bearish factors in the market. For example, when the market rose to 5,000 points in 2015, there were many optimistic voices in the market, but the market soon became the top of the trend. The reason is that the valuation of most stocks in the market was at a historical high at that time, coupled with the de-leveraging factor leading to the breakage of the leveraged capital chain, causing a domino effect and triggering a significant market decline.If at that time, the A-shares did not have factors such as overvaluation and lack of funds at play, even if the market had risen to 5,000 points, the trend might not necessarily have become a peak.
Now let's see what ChatGPT thinks about this issue!
Does a unified market expectation lead to an expectation that cannot be realized?
When the market expectation is unified, it usually does not lead to an expectation that cannot be realized. A unified market expectation means that market participants have similar or consistent views on future economic and market conditions. This consensus expectation is typically based on available information and data, and is correct before market disruptions or other unexpected events.
However, while a unified market expectation is usually reliable, it is not impossible for market expectations to be wrong. Market participants may overlook some important information or form incorrect expectations due to personal biases. In addition, failing to consider sudden events or unpredictable changes can also lead to market expectations not being realized.
Therefore, although a unified market expectation is an important factor for market stability, there is still a certain degree of uncertainty and risk. Investors and market participants should continue to pay attention to market dynamics and adjust their expectations to adapt to new information and changes.
Is the peak of the stock market trend caused by a high degree of market expectation consensus?The peak of the stock market is not necessarily caused by a high degree of market consensus. Market trends are usually influenced by a variety of factors, including economic indicators, corporate performance, political factors, market sentiment, and so on.
When market expectations are relatively consistent, there may be a situation of excessive optimism or pessimism. Overly consistent expectations may lead to market prices being too high or too low, thus creating the risk of bubbles or excessive selling. In this case, the market may be close to or entering the peak phase.
Therefore, although market consensus may be a factor in the market peak, the role of other various factors cannot be denied. Investors should consider it comprehensively with other indicators and data to accurately assess the state of the market and potential risks.
Will market consensus lead to the failure of market bottoming?
Market consensus does not necessarily lead to the failure of market bottoming. Market bottoming refers to the process where market prices start to rebound or stabilize after reaching or approaching the low point. When the market is bottoming, a consistent market expectation may help to enhance the confidence of market participants, thus supporting the possibility of market rebound.
However, it should be noted that market bottoming is not always successful, and a unanimous market expectation does not necessarily guarantee the success of market bottoming. The market trend is influenced by a variety of factors, including economic data, corporate performance, policy changes, and so on. A unanimous market expectation may be wrong, and a failed market bottoming could lead to further declines.
Therefore, during the process of market bottoming, investors should consider a variety of factors comprehensively and follow the principles of cautious and rational investment, rather than relying solely on the factor of unanimous market expectations. The market changes are complex and uncertain, requiring careful treatment and risk management.
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