On September 18th, the Federal Reserve's interest rate cut took effect, and on September 24th, a series of domestic policies were swiftly introduced. On September 26th, an important meeting further clarified the need to invigorate the capital market.

From a macro perspective, the financial policies of China and the United States have entered a honeymoon period of phased resonance. For the capital market, no matter how tortuous the path may be, the future is certainly bright.

The most pressing question now is, what should we do when a bull market arrives?

**The bull market does not happen overnight.**

Since 2008, the A-share market has experienced four bull markets of varying sizes, namely from 2008 to 2009, 2012 to 2015, 2016 to 2017, and 2019 to 2020.

Reviewing the market trends of these periods, the evolution of the market行情 follows a similar pattern, divided into three stages: valuation-driven increases, valuation retractions leading to index adjustments, and earnings improvements driving further increases.

Specifically, the valuation-driven phase typically lasts about a quarter, with an increase of 20% to 30%. This phase is mainly characterized by oversold rebounds, with growth sectors and oversold sectors performing better in the market.

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However, valuation-driven increases ultimately lack a solid foundation and are fragile. If the macro policy stimulus does not continue to intensify, the market will still face valuation retractions. Historically, index adjustments are generally controlled within about 10% and do not break below previous lows.

This round of market行情 has rebounded violently by nearly 20% from the low point. According to past experience, the valuation-driven phase is gradually coming to an end. While there may be further increases, the potential risks of blindly chasing highs now are obviously higher than the potential gains.

On September 27th, the Shanghai Stock Exchange system temporarily crashed, indicating the high enthusiasm of investors entering the market. The return of confidence is a good thing for the overall market, but individuals should maintain more calmness. The most advisable approach at present is to maintain composure and wait for new buying opportunities. Given the rapid rise in the market this time, subsequent adjustments may also be quick. Stay patient, as buying opportunities are likely to arise soon.Profit-driven momentum is the true hallmark of the arrival of a major market trend. Once this stage is reached, the main track that leads the entire bull market will emerge. In 2008, it was the mainline cyclical stocks; from 2013 to 2014, it was mobile internet; from 2016 to 2017, it was the leading stocks; and from 2019 to 2020, it was electronic stocks. This time, there will also be new themes, but they are not yet certain and will require observation as the market evolves.

As long as the main track is identified, all investors need to do is to buy and then hold on tight, avoiding the temptation to jump between different sectors. Throughout history, many people have tried to achieve excess returns by constantly buying and selling, but often the outcome is a loss, not even achieving average returns.

History tends to rhyme, but it does not simply repeat itself.

This market will have significant similarities to the past in its process, but the essence and content of the market trend will also undergo noticeable changes.

[Value-Driven Slow Bull Market]

Almost every bull market in the history of A-shares has been a mad bull market, with rapid increases in a short period, followed by a sharp decline, leaving a mess, which is detrimental to both the country and its people.

This time, it is completely different. If managed properly, there is a strong hope for a long-awaited, slow and steady bull market similar to the U.S. stock market, which is determined by a variety of factors.

Firstly, regulatory authorities have made a series of timely adjustments in recent years.

Cultivating patient capital, guiding long-term funds into the market, increasing the dividend ratio of listed companies, forcing the clearance and delisting of junk stocks, and cracking down on market manipulation are all aimed at a single goal: to rectify the market, promote the development of China's stock market towards a healthy and sustainable direction, and guide investors from speculative trading to value investing. With the deepening of reforms, the market atmosphere has significantly improved.

Secondly, the weight and influence of mainline funds in the market are growing larger.

The increasing role and impact of mainline funds in the market are also a key factor in shaping the market trend. These funds, with their long-term investment horizon and focus on value, can provide stability and direction to the market, contributing to a more mature and rational investment environment. As these funds continue to grow in size and influence, they can help to steer the market towards a more sustainable and value-driven path.As of the end of August 2024, the combined holdings of A-share circulating market value by professional institutional investors such as equity public funds, insurance funds, and various pension funds approached 15 trillion yuan, more than doubling from the beginning of 2019, with their proportion of the A-share circulating market value increasing from 17% to 22.2%.

On September 24th, the central bank governor announced the establishment of a new special re-lending tool with an initial quota of 300 billion yuan, and if the effect is good, two more quotas of 300 billion yuan could follow. In addition, a swap facility for securities, funds, and insurance companies will be created with an initial scale of 500 billion yuan, and if the effect is good, two more quotas of 500 billion yuan could follow.

In an optimistic scenario, there will be 2.4 trillion yuan entering the stock market, which means that main funds represented by securities finance, insurance capital, securities firms, social security funds, and public funds will have more say. The style and preferences of these institutions are mostly value investment.

For the above reasons, when the market enters the profit-driven phase, large-cap stocks will be an indispensable direction.

The industry and market value distribution of the CSI 300 is relatively balanced, with smaller fluctuations and stable earnings of constituent stocks, a higher overall dividend rate, and a lower valuation level, possessing characteristics such as "high quality, large market value, high competitive barriers, and reasonable industry distribution". It is a broad-based index worth paying attention to for long-term investment by investors, especially some related ETFs. For example, the CSI 300 ETF Huaxia (510330) has an absolute return of over 84% in the past ten years, far higher than the increase of the CSI 300 index (52%) during the same period.

At present, the market is in the stage of fermenting, and the growth enterprise board, which has experienced a large drawdown and suppressed valuation, and the science and technology innovation board, which rose the most during the National Day holiday in Hong Kong stocks, are receiving more attention. Therefore, funds such as the Science and Technology Innovation 100 ETF Huaxia (588800), the Growth Enterprise Board 100 ETF Huaxia (159957), and the Growth Enterprise Board Growth ETF (159967) are also worth paying attention to. In the recent trading days, a large number of stocks have hit the daily limit, causing many ETFs to reach the daily limit. If an ETF hits the daily limit and cannot be bought again, and investors are strongly optimistic about the future performance of the index and do not care about short-term fluctuations, they can consider purchasing ETF connected funds outside the market. As long as there are no purchase restrictions, investors can buy ETF connected funds. For example, the connected funds of the Science and Technology Innovation 100 ETF Huaxia (588800) mentioned above (Class A: 020291, Class C: 020292), the Growth Enterprise Board 100 ETF Huaxia connected fund outside the market (Class A: 006248, Class C: 006249), and the Growth Enterprise Board Growth ETF connected fund outside the market (Class A: 007474, Class C: 007475).

After the incremental policy in the monetary and financial field was announced on September 24th, the market generally believed that the policy side would decide the follow-up pace and intensity of fiscal policy based on observing the effect of the "924 financial policy". However, the reality far exceeded market expectations. Only two days later, the Political Bureau meeting on September 26th made a clear statement and requirements for the implementation of fiscal policy.

Since the 18th National Congress, the Political Bureau meeting in September each year has rarely involved economic issues, and it has never been the case to analyze and deploy short-term economic work. This time, breaking the routine not only highlights the urgency of current growth-stabilizing work but also demonstrates the determination of the top level to boost the economy.

Recently, there has been a high call for the central government to issue long-term special treasury bonds, and it is now completely possible to implement this measure. Once this measure is implemented, the basic situation of the entire market will improve, and the profit-driven market will also form a closed loop in logic.

Just like standing on the top of a high mountain and looking at the shining and surging sun in the east, the Chinese stock market is about to turn a new page.