From October 20-22 along the banks of Shanghai's Huangpu River, the 2026 Sustainable Global Leaders Conference will return. Nobel Prize and Turing Award winners will speak on-site about the future of technology and trends, and there will also be a live dialogue between网红 professors who "rescue" people from anxiety and the era of involution — Macfarlane and Xiang Biao! Limited seats available, first come first served. Let us embark together on this sustainable journey! [Click to register] For stock trading, rely on JINQILIN analyst reports — authoritative, professional, timely, comprehensive, helping you uncover potential thematic opportunities! Source: Liuli Investment Report. On October 15, renowned economist and Chief Investment Officer of Lianhua Asset Management Hong Hao, in a dialogue with Now Finance, gave clear views on key issues including US inflation data, panic selling in the market, and whether a rebound will occur in the future and when. Recently, the AI sector experienced a sharp decline, with Korean and Japanese stocks also plummeting. Hong Hao pointed out that he believes this can be regarded as panic selling; all risk assets have entered an oversold state. But even the worst market has rebounds, and even the coldest winter will see spring; Hong Hao believes that the market is currently in the final stage of negative factors being priced in, and a major rebound is highly likely before year-end. Hong Hao was wary of the rapid surge in the AI sector in the second quarter of this year. We previously published his multiple warnings in June that there would be a major correction, click here for details. But now that the market has been repeatedly hammered, Hong Hao firmly believes that when everyone is panicking, we should not panic. In late October and early November, there will be Federal Reserve meetings and US midterm elections. The market generally prices in advance, and we should see the end of pricing before these events occur. Finally, he summarized that the current market is in the final stage of selling, but the final stage often accelerates; we are still trading on the left side, which is the process of bottoming, so if you rush in quickly, it could be quite painful.
As for the impact of the Federal Reserve starting a rate hike cycle on the stock market, Hong Hao believes that looking at history, the Fed generally does not hike just once — it will certainly hike multiple times in succession. But during the first few hikes, if they reflect economic strength, there is actually not much impact on stocks; only when rates keep rising, rise too high, and when financial conditions become excessively tight, will the pressure on risk assets and stocks truly manifest. Hong Hao further pointed out that this round of US inflation mostly comes from gasoline, healthcare, and food. Although the data exceeded expectations, it is still at a reasonable level. Compared with over 8% in 2001, the current just over 2% cannot be considered very high inflation; at the same time, labor compensation is still declining. Although overall inflation is expected to continue rising in the coming months, if this is already anticipated by the market, it should not become a factor to worry about when trading. Moreover, AI investment will slow down by next year, so demand-pull inflation driven by growth will decline. Therefore, most likely in the first quarter of next year, in spring, we should see inflation momentum begin to decline. Liuli Investment Report (liulishidian) has compiled and selected the essence of Hong Hao's sharing as follows:
Inflation Overall at a Reasonable and Controllable Level, Should Not Become a Factor to Worry About When Trading
Host: US September CPI year-on-year came in higher than market expectations. How will this round of inflation evolve going forward? Hong Hao: First, CPI inflation data is not the standard by which the Fed decides to hike or cut rates — the PCE consumption inflation indicator is. Of course, we are not saying CPI is meaningless, just that its reference value is not as great as PCE. Second, looking at this inflation data, labor compensation has not grown significantly, and there is not much change at the wage level. This round of inflation mostly comes from gasoline, healthcare, and food. So I think that although the data exceeded expectations, it is still at a reasonable level. If it were like over 8% in 2001, that would certainly be very high inflation. But now at just over 2%, it is actually very close to the Fed's 2% inflation target. If you exclude some volatile commodities, this inflation is still controllable. At the same time, labor compensation is still declining, so although from a model perspective we will still see overall inflation continue to rise in the coming months, if this is already anticipated by the market, then it should not become a factor we worry about when trading. This is mainly because when you look at inflation, you also need to observe what exactly is causing it. First, inflation expectations have basically not moved. If, according to the Treasury Secretary's statement, the US grew over 3% in the third quarter, now adding just over 2% inflation, US third-quarter economic growth is 5.5% or even higher — meaning US third-quarter growth even exceeds China's GDP growth. Second, there is the term spread, which mainly reflects international investors' concerns about the US fiscal deficit. We saw that during US Treasury auctions, overseas buying was very strong — the largest overseas buying since we have data. At the same time, we also saw the dollar strengthen again, indicating capital is once again continuously flowing into the US. If there were no confidence in US fiscal health, capital would not go to the US. So these are all things that I believe market consensus has overlooked. Of course, I think inflation will continue to rise, mainly due to oil prices and chain reactions. But to say that because of last night's inflation result, Korean stocks fell 8 points and the Nikkei fell 5 points, I think that is an overreaction.
AI Investment Will Slow Next Year, Inflation Momentum May Decline Accordingly
Host: Everyone is hoping to see inflation decline. Is there a chance to see inflation slow by the end of this year? Hong Hao: Early next year, more likely because AI investment will slow by next year. By the first quarter of next year, the growth rate may decline. If growth slows, then demand-pull inflation driven by growth will actually decline. So most likely in the first quarter of next year, in spring, we should see inflation momentum begin to decline. Host: If AI investment has a chance to slow, will we see bond yields gradually decline? Hong Hao: Actually, short-term bonds — 3-month and 2-year — are already in an oversold state. From a trading perspective, if you want to continue betting on rising bond yields, I think this trend is already at the "fish tail." It is possible that the market rises due to panic sentiment, but from a trading perspective, this is the final tail-end move, and I think it is already severely oversold. Now inflation is in the 2% range, while during Paul Volcker's tenure in the 1980s it was usually in the low teens. In 2021, when Biden was pumping money, it was usually over 8%. So it is hard to imagine how one concludes that we now have high inflation and then derives what should happen to interest rates. That logic cannot be derived.
All Risk Assets Have Entered an Oversold State
Host: On October 14, AI-related hardware, such as cloud service providers and computing infrastructure service providers, all fell sharply. Besides concerns about inflation and interest rates, there is also a claim that the entire AI narrative has reversed. Does yesterday count as panic selling? Hong Hao: It can be regarded as panic selling, especially Korean stocks and the Nikkei — those are indeed panic. But panic selling has a characteristic: if you are trading, you will see that US equity Gamma exposure (GEX) has tightened again, meaning buy-the-dip buying is decreasing, which actually accelerates downward price pressure. Of course, we see this kind of tape — it will probe downward very quickly and make you very uncomfortable. You clearly know valuations are already cheap, but because downward pressure is so strong, when you try to catch the falling knife, it is very painful. But your question is, is it oversold? It is definitely oversold. All risk assets have entered an oversold state, and bond yields — that is, short-end US Treasury yields — have also entered an oversold state. But we are still trading on the left side, which is the bottoming process, so if you rush in quickly, it will be very painful.
Oversold Will Definitely Bring a Rebound, We Are in the Final Stage of Negative Factors Being Priced In
Host: So when will the oversold rebound occur? Will there be a rebound before year-end? Hong Hao: Definitely. Actually, in June I said the AI bubble would definitely burst. From June to the end of July, Korean stocks — not counting interim rebounds — have actually fallen 60%. But although they fell 60%, in August and early September there were relatively strong rebounds, once returning to over 7,000 points. So even the worst market has rebounds, and even the coldest winter will see spring. I think when everyone is pessimistic, we should instead look for important factors overlooked by market consensus and see what to do next, rather than repeatedly explaining why the market is falling now. Actually, the reasons for the current decline are obvious: US inflation, US Treasuries, and concerns about future semiconductor growth expectations. The market has not yet answered well when all these concerns can be fully priced into stock prices. But I believe we are now in the final stage of negative factors being priced in. Host: Is there a chance that before the end of this year everything will be reflected in stock prices, followed by a big rebound? Hong Hao: I think it is highly likely. From a historical pattern perspective, in late October or early November, there are several key events. October 28 is the Federal Reserve meeting, and November 3 is the US midterm elections. Both are major events. But we see that the market generally reacts in advance — before these events occur, we should be able to see pricing finish. I think a rate hike in October is a high-probability event, basically no suspense, and then Republicans losing the House is basically no suspense. So if the market continues to use these already high-probability events to explain how the market will fall, I think that has no explanatory power, or it has already overreacted.
Hong Kong Stock Trends and Fundamentals Are Significantly Misaligned
Host: How will Hong Kong stocks reflect this? The Hang Seng Index is now around 24,000 points — does it still need a deeper correction? Hong Hao: First, I think Hong Kong stocks have performed very poorly this year, especially the Hang Seng Tech Index, which is actually the worst-performing major index globally. Conversely, Hang Seng Tech has relatively fully reflected many negative expectations; I noticed that on October 15 Korean and Japanese stocks plunged, and on the 14th US stocks plunged. But the Hang Seng Index was relatively firm, mainly because the Hang Seng Index is cheap enough. At the same time, the factors affecting the Hang Seng Index are more positive rather than negative. For example, the RMB has appreciated — this year it has appreciated by over 5 percentage points. And about 80% of Hong Kong-listed companies have revenue denominated in RMB. So why do we see Hong Kong stocks instead falling? There is a large misalignment between stock trends and fundamentals. Host: Will this misalignment be corrected afterward? Hong Hao: It will definitely be corrected, but when? That is what everyone cares about more. Everyone knows it will be corrected, but I know that talking about the long term is meaningless. The question that needs to be answered now is how this misalignment will be corrected in the short term. This may be driven by these catalysts: for example, overly pessimistic factors in US stocks, the Fed's interest rate policy, the dissipation of uncertainty around the US midterm elections, and China's economic data. I think this year it will be above 4.5%, and that is also no suspense. If you look at export data, September rose 30% year-on-year, and similar growth will appear in the remaining months of the fourth quarter. As for domestic demand, it has been weak for a long time, so no need to count on it. Chinese people not consuming is a phenomenon of the last 40 years, not something that only happened in the last 4 years. Our savings rate is still the highest in the world. But this is not a factor we need to worry about when doing short-term trading now, because it has persisted for 40 years — you cannot expect it to change within one or two years.
Market Is in the Final Stage of Selling, Early Fed Rate Hikes Have Limited Impact
Host: If correction is to occur, does it all depend on investment in AI, technology, and new productive forces driving the entire economy upward, with fundamentals improving? Hong Hao: We all know that quantitatively from a trading perspective it shows oversold, and we are in the final stage of selling. Of course, the final stage often accelerates. So many people cut losses at this most painful stage, unable to hold on, and exit by cutting losses. But I think when everyone is panicking, we should not panic. The most important thing in stocks is growth, not interest rates. At the same time, even if you think interest rates will rise, you should observe why interest rates are rising, rather than merely observing that interest rates are rising. If you look at history, the Fed generally does not hike just once — it will certainly hike multiple times in succession. During the first few hikes, if they reflect economic strength, there is actually not much impact on stocks. But if it keeps raising, raises too high, and when financial conditions become excessively tight, only then will pressure on risk assets and stocks truly manifest — not during the first or second hikes. Sina statement: This news is reprinted from a Sina partner media outlet. Sina publishes this article for the purpose of transmitting more information and does not mean it agrees with or confirms its views or descriptions. The article content is for reference only and does not constitute investment advice. Investors operate at their own risk.
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