As August's trading draws to a close and September begins, the market staged a stabilizing recovery following July's sharp correction, which has helped restore some degree of investor confidence. Heading into September, conditions appear favorable for a continued rebound, with the market showing signs of oscillating upward momentum.
Let me state a clear position upfront: July's steep decline in technology stocks was part of a deleveraging process rather than a bursting of the tech bubble. This suggests the broader uptrend remains intact, with no clear signs of a structural shift toward weakness. Back in June, when market sentiment was euphoric and investors were chasing gains aggressively, I advised caution—urging people to curb greed and reduce exposure, particularly locking in profits on tech stocks that had already rallied substantially. A three-step strategy was recommended to avoid the risk of a sharp pullback: first, firmly eliminate leverage; second, reasonably reduce position sizes; and third, maintain balanced exposure across both technology and dividend-paying sectors to weather potential market corrections. This approach proved effective.
By August, with the market having largely completed its adjustment and beginning to recover, the time had come to conquer fear once again. Although some prominent financial voices were declaring that a bear market had arrived, I remain steadfast in my belief that the current trajectory can persist—this is not a trend reversal. Of course, this rally differs markedly from previous bull markets in several key ways.
The first distinguishing feature is the market's slower pace, characterized by two steps forward and one step back, yet the duration of this cycle is likely to be extended. Historically, A-shares exhibited a pattern of short bull runs followed by prolonged bear markets, with sharp gains in rallies and severe declines in downturns. However, the current cycle has the potential to span multiple years, albeit with modest annual gains, requiring investors to exercise considerable patience in selecting quality industries and companies.
The second feature is the pronounced divergence across sectors. The technology and innovation segment is leading the charge and is expected to serve as the core investment theme throughout this entire cycle. Investors should therefore pay close attention to opportunities within the tech innovation space. Since early last year, I have highlighted six major industries—including chip semiconductors, computing power, and algorithms—which have entered their earnings acceleration phase, reflected in strong stock price momentum as well. Other sectors such as humanoid robots, commercial aerospace, solid-state batteries, and innovative drugs have also had their moments in the spotlight. However, given that companies in these areas have yet to achieve mass production or reach their earnings inflection points, their stock prices are prone to greater volatility. Investors must remain mindful of these risks and adopt a contrarian approach—positioning during significant pullbacks and taking profits during sharp rallies. Without earnings to support sustained upward movement, these stocks tend to decline sharply and quickly when sentiment turns, while rallies are often driven by speculative narratives about future potential, which inherently leads to amplified swings.
The remaining four industries all require a medium-to-long-term investment horizon and a contrarian mindset. Profits should be locked in promptly once realized. Looking ahead to next year and beyond, as earnings materialize, these four sectors are likely to produce substantial upward moves—patience will be rewarded, but investors must stay attuned to the timing of earnings delivery.
Recently, several government departments released the "8·28" real estate policy package, sparking widespread discussion. This initiative comes against the backdrop of shrinking transaction volumes and sharply declining home prices, with the correction having persisted for four to five years and price drops reaching 40% to 50%. Transaction volumes have dwindled to just 30% to 40% of peak levels, while real estate development investment has fallen significantly for three consecutive years, declining 20% to 30% annually—dragging overall fixed-asset investment growth into negative territory. To revitalize the property market and ease the repayment burden on homebuyers, this new policy package contains several noteworthy highlights.
First, the maximum term for individual housing loans has been extended from 30 to 40 years, reducing the annual repayment burden for buyers, though it also means paying interest for an additional decade. Of course, borrowers are not required to hold the loan for the full 40 years—if a substantial income windfall arrives, early repayment remains an option. Second, addressing the issue of presold homes failing to be delivered on time, which has harmed buyers' legitimate rights, the policy emphasizes "what you see is what you get"—developers must complete construction before buyers make full payment, and interest obligations only begin after handover. These measures are designed to protect homebuyers and restore confidence. However, this also increases financial pressure on developers, who are being forced to deleverage passively and can no longer sell units when only the basement and ground floor are complete, which previously allowed dangerously high leverage levels.
Third, the securities regulator has issued guidance supporting new models for real estate development financing, allowing developers to raise funds through equity issuance, bonds, ABS, and REITs. This expands financing channels, alleviates liquidity strain in the sector, and signals a stabilizing policy stance. While this policy package cannot reverse the downward trend in real estate, it should help stabilize market expectations. Looking forward, the property market will experience significant divergence: prime locations in first- and second-tier cities, supported by genuine demand and scarcity, may see transaction volumes and prices recover first, but properties in non-core areas—particularly those lacking real demand—may struggle to find buyers and could see further price declines. Investors should assess their individual circumstances before venturing into property investment. The era of expecting substantial returns from real estate speculation is definitively over.
The extension of mortgage terms from 30 to 40 years benefits buyers with stable employment, but those with uncertain income or weak confidence in future earnings should approach home purchases cautiously, as failure to meet repayment obligations could result in foreclosure. Additionally, buyers must prioritize location, construction quality, and long-term appreciation potential. Back in 2021, when domestic home prices were elevated and transactions were booming, I noted that with tightening regulatory policies, the golden 20-year cycle for real estate investment was nearing its end, and the next decade would belong to capital markets. This forecast has since been validated. The direction of household savings migration has shifted from bank deposits and property toward capital market participation.
In terms of investment opportunities, the primary avenue for household wealth growth is gradually transitioning toward capital markets, a trend that is unlikely to reverse. On the overseas front, US government debt has officially surpassed the $40 trillion mark, Treasury yields remain elevated with ongoing volatility, and investor expectations regarding Fed policy continue to shift. At the recent global central bank symposium, Fed Chair Warsh made clear that the 2% inflation target cannot be compromised, signaling a hawkish stance. The Jackson Hole meeting, attended by central bank governors from major economies, draws intense market focus because the Fed chair's remarks directly signal the future direction of monetary policy. As the "world's central bank," any shift in Fed policy triggers corresponding adjustments among global central banks. Warsh's hawkish tone—emphasizing inflation control as the Fed's primary objective—reduces the likelihood of rate cuts while increasing the possibility of hikes. However, this does not necessarily mean the September FOMC meeting will deliver a hike.
November's US midterm elections add another layer of complexity. If the Fed raises rates in September, US tech stocks could suffer significant declines. With more than 50% of American household assets allocated to stocks and funds, a sharp market downturn would likely erode President Trump's approval ratings, which currently stand at 39%—historically low. Further declines could cost Republicans their narrow Senate majority. Should Democrats gain control, Trump's executive orders could face obstruction, rendering him a lame-duck president unable to accomplish much in his final two years—a scenario he would certainly want to avoid. This explains why Trump previously pressured former Fed Chair Powell, even resorting to verbal attacks, to cut rates, but Powell maintained the central bank's independence and refused. Now that Trump has nominated Warsh as the new Fed chair, it's unlikely Warsh would risk raising rates against the president's wishes, as that would invite significant political pressure. Maintaining the Fed's monetary policy independence is crucial—it's a cornerstone of the dollar's status as the world's reserve currency, and undermining it would shake global investor confidence in the greenback. The Fed indeed finds itself in a difficult position, with both rate hikes and cuts carrying significant risks.
Turning back to domestic markets, the technology sector, after July's sharp correction, has shown clear signs of recovery in August. It's evident that the second-half tech landscape will differ markedly from the first half. In H1, investor confidence in tech was robust, with the sector delivering standout performance—while other segments declined, chip, semiconductor, computing power, and optical module stocks rallied significantly. The first half was essentially a tech-led market with broad-based gains across the sector. In the second half, however, we're likely to see severe divergence: leading tech companies with solid earnings may push stock prices to new highs, but speculative theme stocks and concept plays will struggle to recover. Additionally, sector rotation will become more pronounced, with tech no longer dominating the market. This is why I recommend a balanced allocation strategy—one hand in technology, the other in dividend-paying stocks—providing both offensive and defensive positioning. Maintaining moderate position sizes, neither fully invested nor fully in cash, is the optimal portfolio management approach for the second half.
The gold sector has recently experienced both a sharp run-up and a notable pullback, with volatility intensifying. When international gold prices were at $1,900 per ounce, I explicitly stated that de-dollarization is a major trend, dollar credibility is being questioned, and gold's long-term upward trajectory is clear—breaking $5,000 per ounce was simply a matter of time. This target was reached ahead of schedule in January of this year. After surpassing $5,000, profit-taking pressure drove prices down from a peak of $5,600 to around $3,800. Profit-taking, combined with the Strait of Hormuz blockade and rising oil prices that forced the Fed to pause rate cuts, contributed to the sharp decline. Some central banks selling gold reserves added further downward pressure. However, when prices fell below $4,000, I indicated this represented a "golden pit" and a favorable entry point. With subsequent easing of Middle East tensions, gold rebounded quickly to around $4,700 per ounce. Despite recent fluctuations, the uptrend likely remains intact. In the short term, gold has rallied too quickly and may face pullback risk—locking in profits is prudent—but over the long term, gold prices are poised to reach new all-time highs. Gold allocation should be approached from a medium-to-long-term perspective rather than trading on short-term movements. Including a moderate allocation of gold assets in one's portfolio remains a sound strategy for hedging against currency debasement. Of course, this doesn't mean gold prices won't fluctuate—rather, the long-term trend is upward, and significant pullbacks historically represent opportunities to accumulate positions.
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