A-Share Bull Run: Potential to Break 6,000 Points

The direction of the A-share market has changed overnight, with pessimistic voices seemingly vanishing in an instant, replaced by a surge of excitement.

In the past, we often described this change with the phrase "a big bull candlestick changes beliefs."

Now, looking at the rise in major indices, although a big bull candlestick has not appeared yet, "beliefs" have been altered.

One issue worth mentioning is that the cycle of ups and downs in the A-share market is entirely "held hostage" by the Federal Reserve, which is not a glorious situation!

It's important to note that over the past year, despite multiple rounds of market rescue measures, we have not seen such a significant effect.

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What's more ironic is that only the A-share market relies so heavily on the Federal Reserve.

Over the past year, most global markets have followed the rise of the U.S. stock market, yet the A-share market had to wait for the Federal Reserve to significantly cut interest rates and international capital to flow back before taking action.

This clearly demonstrates to the world that the A-share market is a very compliant "chopstick."

If everyone can consider this logic, they can understand why over the past two months, there has been much criticism of those deliberately pushing up the five major banks to drive the continuous decline of the major indices.

Of course, the "brand" of the Federal Reserve is too clear, which actually makes it easier to analyze the future upward cycle of the A-share market.

A preliminary estimate suggests that the end of this round of the Federal Reserve's interest rate cut cycle is most likely in 2026, and the start time of the Federal Reserve's next interest rate hike cycle is likely even more distant.

If I must make a prediction, it is expected to be after 2028.

That is to say, from now until the next tightening cycle, it is a high probability event that there will be more than four years.

This is a very rare upward cycle for the A-share market.

We have just experienced a down cycle of three years and eight months, and we often compare this time span with the down cycle from 2009 to 2013.

It should be pointed out that from 2009 to 2013, the United States was also in a monetary easing cycle, so why did the A-share market experience a long period of decline?

This is related to the fact that after the 4 trillion yuan stimulus in 2008, China started to raise interest rates in 2010, which means that during that period, it was "loose externally and tight internally," leading to the decline of the A-share market.

It should be noted that even though the A-share market has undergone a long cycle adjustment, the "shadow banking" issue has not been resolved, and it has even hurt the economy.

It was not until 2015 that we carried out another "financial deleveraging" action, and it was only in 2020 that it was basically cleared.

From 2014 to 2015, the A-share market experienced a mini bull market, and when we look back at this "bull," we often like to describe it as a "water bull" or a "leverage bull."

The "shadow banking" caused a flood of funds, which was an important inducement to promote the "water bull."

Subsequently, at the end of 2015, the Federal Reserve started a tightening cycle.

The reason why this round of the A-share market's upward cycle has many similarities with the cycle after 2013, according to the author's opinion, mainly has two points for reference: First, the adjustment time of the A-share market is relatively long, and the decline space is relatively large; second, compared with that wave of "shadow banking" factors, we are currently in the lowest interest rate era since the founding of the country, which will be one of the main driving forces of this round of the A-share market's upward cycle.

In addition, this round of the Federal Reserve's interest rate decline cycle and the domestic continuous push for interest rate decline have occurred "resonance."

Thinking from the perspective of capital driving the stock market to rise, the confidence is already very strong.

Unlike that round of "leverage bull," the leverage ratio in this round of the upward cycle is lower, which means that the probability of a slow bull appearing is greater.

In terms of economic fundamentals, in 2015, we carried out a "financial deleveraging," and in 2021, we carried out another "real estate enterprise deleveraging."

This round of the upward cycle will be the healthiest time for the domestic economy in the past 16 years, which is another fundamental factor that can drive the A-share market to go big.

Based on the Federal Reserve's interest rate policy just turning, the A-share market has just fallen to a key low point, and a real big bull market is about to start.

Coupled with the support of economic fundamentals and domestic monetary policy fundamentals, the probability of this round of the upward cycle exceeding 2014-2015 is very high.

The author believes that this round of the A-share market's upward cycle is expected to go very calmly, and the probability of breaking through 6000 points and refreshing the historical high of 6124 in October 2007 is very high.