This year's market adjustment is more, many investors are more anxious, history is always strikingly similar, share an article by Lao Luo on July 11, 2018 "Cherish the bear market, slowly set the investment", and encourage everyone.
Cherish the bear market and slowly set the vote
Three years have passed since the peak of the last bull market in June 2015, and investors and basic people have been frustrated in the market where the shock is downward and the bottom is repeatedly built, saying that they are "afraid of falling". To this end, Lao Luo will use objective historical data to analyze the direction of the bear market and explore whether we have reached the bottom of the bear market.
"Dare to ask where the bottom is?"
We have conducted a characteristic analysis of the bottom of three bear markets since 2000, and from this we can judge whether the current bear market has bottomed out and whether it is wise to enter the market now.
Let's start with a brief review of the basics of the three bear markets in history.
Source: WIND Deadline: 7/10/2018
Below we will conduct a characteristic analysis of the bottoming of three bear markets in history, which can help us determine whether the current market has fallen to a low enough point to rebound.
01 Drawdown with period
Through observation, we found that in 2005, 2008 and 2013, the bottom of the bear market, the Shanghai Composite Index fell by more than 40%, and the cycle ranged from 1 year to 5 years.
From the comparison, we can see that the bear market is the head, and the decline of the Shanghai Composite Index has reached 45.93%, close to the decline when the bear market bottomed out in June 2013. In addition, the cycle of this bear market is also close to the average level of the historical bear market cycle. The initial characteristics of a bear market bottoming out emerge.
02 Turnover and turnover rate
The bear market bottoming out is also reflected in the sluggish turnover and turnover rate. To this end, we measured the turnover of the Shanghai Composite Index at the bottom of the bear market and the decline in the turnover rate relative to the culmination of the round and compared it with the current data.
Compared to the previous three bear market bottoms, the current stock market volume has shrunk even more, falling 87% compared to the bull market cap in June 2015. The current turnover rate is only 0.35%, which is lower than the turnover rate at the bottom of the three bear markets in history, and a whopping 85% drop compared to the bull market peak in June 2015.
03 P/E ratio and price-to-book ratio
From a valuation perspective, low price-to-earnings (TTM) and low price-to-book ratios are one of the salient features of bear market bottoming.
Source: WIND Deadline: 7/9/2018
Extracting the data of the Shanghai Composite Index for analysis, whether from the perspective of price-to-earnings ratio or price-to-book valuation, the absolute valuation of the current bear market is close to the median of the valuation data at the bottom of the three bear markets in history, and is at the relative low of the historical quantile. It is worth noting that the current SSE's price-to-book ratio is at a historical scale of 5.26%, far lower than the price-to-book ratio when the two bear markets bottomed out in 2005 and 2008.
04 Number of broken shares
History tells us that the greater the number of net-breaking companies, the greater the likelihood of a bear market bottoming out.
As of July 9, 2018, there were 237 broken stocks in the market, accounting for about 7% (data source: Wonder All A). The proportion of broken stocks at the bottom of the three bear markets in history is between 7% and 15%. The absolute number of net-breaking stocks in the current stock market has exceeded the number of net-breaking stocks at the bottom of the bear market in 2005 and 2013, and the proportion of net-breaking stocks is also comparable to the bottom period of these two bear markets.
05 Number of "dollar shares"
In "About the Bear Market", Linshui Woodman proposed a novel way to determine whether the bear market has reached the bottom, that is, to measure the number of "one-dollar shares" (that is, the stock price is less than 2 yuan) in the stock market. If the number of "one-dollar shares" reaches more than 10, it is considered that the stock price has fallen to the bottom and the market is about to rebound.
Comparing the number of "one-dollar shares" at the bottom of the three bear markets in history, we can see that the absolute number of "one-dollar stocks" in the market is 31, accounting for 0.88% (data source: Wande Quan A), although there are still differences from the data at the bottom of the two bear markets in 2005 and 2008, but the absolute number and relative number have exceeded the number of "one-dollar shares" when the bear market bottomed out in 2013.
06 Market sentiment
During the bear market bottom period, the market pessimism is released, and even if there is a positive factor, more analysts choose to maintain a cautious attitude and do not easily issue recommended ratings.
At the same time, from the perspective of trader behavior, the current number of accounts opened is less than 1/10 of the number of accounts opened in the same period of 2015, and the decrease in the number of accounts also indicates that the current stock market is experiencing a similar market state to that of the three bear markets in history.
What do investors say?
The above method of determining whether a bear market has reached the bottom may not be complete, but the information indicates that the market has formulated the lowest point in the process of repeated bottoming.
Let's hear what investors and citizens have to say about the current bear market:
Shareholder A
"When I feel the pressure of the decline is getting bigger and bigger, and I want to clear my position, the bottom is almost the same, and the patience will pass!"
"The macro situation is unclear, and I don't want to be a receiver anymore!"
Shareholder B
What is investing?
Just when everyone is hesitant about whether the bear market has bottomed out, and whether to read the bottom and enter the market is undecided, savvy investors have tailored a relatively safe investment method for themselves - fixed investment!
Just as the so-called "bear market does not buy stocks, the bull market is hard", in the Chinese stock market with long bears and short bulls and difficult to predict, the advantages of fixed investment are revealed:
01 There is no need to over-time
After years of groping in the market, the old investors are well aware that it is difficult to accurately copy the bottom than to go to the sky!
One of the great advantages of fixed investment is that there is no need to over-select the time, as long as the stock market is at a relatively low point, investors can use fixed investment funds to buy a relatively large number of shares, amortize costs, and reduce risks!
According to the above analysis, the current bear market cycle has reached 3 years, liquidity, valuation and other indicators are similar to the indicators when the three bear markets in history bottomed out, and the bear market has reached the bottom of the possibility. At this time, the start of the fixed investment, can not consider the risk of the stock index continues to fall, diversify the risk of one-time investment, is not beautiful?
02 Avoid subjective emotional interference
Are you tired of worrying about the ups and downs of the market?
Fixed investment provides you with a solution. One of the advantages of fixed investment is to avoid the interference of subjective emotions and not to disrupt the long-term strategy for small fluctuations. No matter how bloody the market is, insist on fixed investment, you can always see the dawn while maintaining a stable mentality, and get good returns!
03 Reducing "Opportunity Cost"
We need to consider the "opportunity cost". No one in the market can expect things like Gods, just because they have an uncertain mentality about when the bear market will bottom out, they will delay it again and again, giving up the accumulated share of fixed investment for a period of time, and the "opportunity cost" brought by it is very high.
In addition, there is a compound interest effect on the return of fixed investment, and the compound interest effect takes a long time to fully display. Sink your heart and slowly set your foot in the bear market, and you will eventually reap the fruits of victory.
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