The Spring Festival holiday is approaching, and the A-share market will enter a 10-day trading suspension. Should investors liquidate their holdings to secure profits and hold cash, or maintain stock positions in anticipation of a post-holiday rally?
There's no need for indecision. By considering historical patterns, the current market environment, and individual risk preferences, investors can make the most suitable investment decisions.
Historical data strongly supports the strategy of holding stocks during the holiday. Over the past 10 to 20 years, A-shares have exhibited a significant "calendar effect" around the Spring Festival, with market advances being the most probable outcome.
Specifically, the probability of the A-share market rising in the week before the Spring Festival is 70% to 80%, with the Wind All-A Index averaging a gain of 0.53% during that period. However, the substantial "red envelope" returns typically materialize after the holiday. Over the past decade, the market has risen in the first week after the holiday with an 80% probability, and the Wind All-A Index has delivered an average return of 2.03%, indicating significantly stronger momentum compared to the pre-holiday period.
The Spring Festival rally in 2024 was particularly remarkable. The Shanghai Composite Index surged 4.85% in the five trading days following the holiday, marking one of the strongest post-holiday performances in recent years and leaving a deep impression on investors.
Beyond the overall upward trend, trading volume and market style typically shift. The market often experiences reduced volume before the holiday and increased volume afterward, reflecting investor caution ahead of the long break and subsequent capital inflows post-holiday. In terms of style, large-cap stocks tend to perform steadily before the holiday, while risk appetite increases after the holiday, often leading to more active trading in small-cap and growth-oriented stocks.
Apart from historical trends, the current market environment also supports a strategy of "moderately holding stocks." The year 2026 marks the beginning of the 15th Five-Year Plan period. Following the holiday, the National People's Congress and the Chinese People's Political Consultative Conference sessions are imminent, with expectations for policies focusing on stable growth, new quality productive forces, consumption promotion, and capital market system improvements. Combined with accommodative liquidity conditions, these factors provide underlying support for the market.
The market adjustment at the start of the year has also mitigated some risks. Significant corrections have occurred in sectors such as computing hardware, storage, commercial aerospace, power grid equipment, and non-ferrous metals, alleviating some pressure. Coupled with the historical "Spring Festival effect," this increases the likelihood of improved market sentiment after the holiday.
Furthermore, the Spring Festival is a traditional peak consumption season. Sectors like tourism, transportation, food and beverage, and retail are expected to see a rebound in activity, potentially boosting related stocks.
Recent analyses from multiple securities firms also indicate that "holding stocks during the holiday" has become the prevailing recommendation. Many institutions emphasize the continuity of the "spring躁动" rally. They argue that, historically, post-holiday market gains tend to be sustained, particularly within the first month after the holiday, where performance generally surpasses that of the pre-holiday period.
The logic behind this trend stems from three main factors: First, post-holiday liquidity is typically relatively ample, with institutional funds being redeployed. Second, policy expectations often peak around the time of the Two Sessions. Third, corporate annual reports and preliminary first-quarter earnings reports provide new focal points for the market.
Some research notes suggest that compared to historical spring rallies during bull markets, the current market may still have room for upside. This is especially pertinent given that the early 2025 market adjustment has already priced in some risks, potentially reducing upward resistance after the holiday.
However, any investment decision must account for potential risks. The extended market closure warrants caution regarding several factors: First, volatility in overseas markets is a primary source of uncertainty. While Chinese markets are closed, major international markets like the US, Europe, and other Asia-Pacific regions continue trading. Fluctuations there, alongside geopolitical shifts, global macroeconomic data releases, and unexpected policy changes, could all impact A-shares upon reopening. Second, internal profit-taking pressure exists. After gains over the past two years, valuations in some sectors are no longer low. Some investors may lock in profits before the holiday, potentially leading to range-bound consolidation or even a minor pullback.
The biggest pitfall of relying on historical patterns is the overconfidence that history will simply repeat itself. Although data shows a high probability of post-holiday gains, exceptions have occurred. Significant market adjustments followed the Spring Festival in both 2013 and 2020. Therefore, blindly following historical trends is not advisable.
Consequently, there is no one-size-fits-all answer to the question of holding stocks versus cash. Investors should formulate personalized strategies based on their individual risk tolerance and investment objectives.
Investors might consider the following three approaches based on their profile: If you are an aggressive investor, you might consider maintaining a relatively high portfolio allocation through the holiday. Focus on sectors with potentially higher post-holiday elasticity, such as technology and growth areas (AI computing chains, semiconductor equipment, humanoid robotics, commercial aerospace - representing new quality productive forces) and advanced manufacturing (new energy, innovative drugs). Also, pay attention to the potential resurgence of small and mid-cap styles after the holiday to capture structural opportunities.
If you are a moderate investor, a balanced allocation strategy may be wise. Consider allocating a portion of your portfolio to high-dividend, yield-generating assets as a defensive base, while dedicating a smaller portion to growth-oriented sectors to capture potential post-holiday opportunities. On the defensive side, focus on high-dividend blue chips like banks, power, and utilities. Complement these with consumer leaders such as baijiu and home appliances to benefit from the seasonal consumption recovery during the Spring Festival. This strategy aims to control risk without entirely forfeiting potential returns.
If you are a conservative investor, you might prefer holding cash or maintaining only a very low allocation to broad-based index ETFs. These investors could utilize idle funds for low-risk wealth management products, such as reverse repurchase agreements, to avoid having capital idle during the long holiday.
Regardless of the chosen strategy, thorough preparation before the holiday is essential. Investors opting to hold stocks should carefully review their portfolio composition to avoid exposure to assets that might be significantly impacted by overseas developments during the market closure.
Investing is essentially the art of seeking high certainty amidst uncertainty. The Spring Festival market break offers a valuable opportunity to step away from the market's noise, calmly reassess one's strategy and mindset, and find the optimal balance between historical patterns, current realities, and personal risk tolerance. This thoughtful approach is arguably more important than merely predicting short-term market movements.
May every investor welcome the new year with a clear plan and peace of mind.
Will you choose to hold stocks or cash during the holiday?
Comments