Let's review the recent market trends.

Since October, the A-share market has experienced a period of adjustment after a sharp rise. On October 18th, the Shanghai Composite Index fell to its lowest point of 3,152.82, a drop of 521.58 points from the high of 3,674.4 on October 8th, exceeding half of the previous highest increase, with a decline of 14.19%.

On the same day, the central bank announced the official launch of the SFISF operation and the formal implementation of stock repurchase and increase in re-lending. Media reports indicated that the General Secretary, during his inspection in Anhui, proposed to advance Chinese-style modernization, with science and technology taking the lead and demonstrating the spirit of "how many times can one strive in life." Driven by this catalyst, the market quickly warmed up, with the information technology innovation and chip concepts becoming very popular. The ChiNext board's daily increase once exceeded 11%, and the trading volume of both markets once again broke through 2 trillion, marking the end of this round of adjustment and the market entering a new period of fluctuating upward movement.

From October 18th to 25th, the science and innovation sector and small-cap style clearly outperformed. At the broad-based index level, the STAR 50 (12.75%), STAR 100 (10.24%), ChiNext Index, CSI 2000, and CSI 1000 were at the forefront, all exceeding an 8 percentage point increase; at the primary industry level, power equipment (12.11%) and electronic segmentation led, both exceeding a 10 percentage point increase; light industry manufacturing, environmental protection, communication, media, and national defense and military industries were at the forefront, all exceeding an 8 percentage point increase.

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Regarding the nature of the recent market trends, the baseline judgment remains "a period of fluctuation and consolidation within a long bull market cycle," meaning that over an extended period, it is still judged to be a bull market. In the short term, the index is likely to fluctuate widely, accumulating strength for a new round of rapid increases.

The nature of the medium and long-term market is the premise of short-term logic, and it is reiterated that the A-share market will be in a bull market in the medium and long term. The reasons are as follows:

The core factor is the predictability of housing price stabilization. On one hand, policy packages continue to exert force, and on the other hand, the attractiveness of rental yields has increased in the context of interest rate cuts. At the end of September, the average rental yield of residential properties in 100 cities was 2.25%, which already has a considerable interest rate advantage compared to the 1.55% five-year deposit rate, enough to change the房东's weighing logic between selling and renting - when dissatisfied with housing prices, there is greater patience to change from selling to renting, waiting for better prices.

The decline in housing prices is a major drag on the domestic economy, affecting PPI through the real estate chain and CPI through the wealth effect. The stabilization and recovery of housing prices will drive the rebound of price indices, the nominal GDP growth rate to a higher level, and the transmission to the recovery of listed company performance, laying a solid foundation for the bull market.

In addition, large-scale fiscal debt reduction, trillions of special treasury bonds injected into state-owned banks, and the central bank's creation of repurchase and increase in re-lending tools, respectively, have a bottoming effect on the economy, banks, and the stock market, greatly reducing the probability of systemic risk. The importance of this matter is no less than promoting the stabilization of housing prices.

Rational people usually follow probabilistic thinking when making decisions, considering the benefits and probabilities of various events, and making decisions based on the expected value of the portfolio. Systemic risk events have a large negative effect, and even if the probability is low, as long as they exist, they will significantly reduce the expected value of the portfolio. Therefore, significantly reducing the probability of systemic risk occurrence is equivalent to significantly increasing the expected value of the portfolio, which can significantly enhance the enthusiasm of the real sector to participate in economic activities.For example, the central bank has created a repurchase loan tool for increasing holdings, and has claimed that the quota can be supplied indefinitely. High-quality listed companies and their controlling shareholders virtually have unlimited ammunition, which in itself is enough to prevent irrational sharp declines in stock prices. It's like nuclear weapons; just having them is enough to prevent world wars. When the risk of a sharp decline in high-quality companies' stock prices is significantly reduced, patient capital will have the confidence to hold stocks for the long term and increase the allocation quota, clearing the biggest obstacle for long-term capital to enter the market. In turn, this also drives more long-term capital into the market, optimizing the stock market's capital structure and laying the foundation for a long-term, slow-bull market.

Based on this judgment, we reiterate our view that the A-share market will have a bull market in the medium term, and in the long term, the probability of a long-term, slow-bull market is also significantly increasing.

Based on this judgment, it can be said that there is no risk of a sharp decline in the A-share market in the near term. Since there is no risk of a sharp decline, the enthusiasm of various types of capital to participate in the stock market will be greatly increased. In the coming period, the trading volume of A-shares is expected to remain active. Even without a general rise in the market, various thematic and concept-driven trends will rise and fall, and the market will not lack opportunities to make money.

Looking back at the recent logic of the A-share market, the general rise in the market has just ended, and the market is currently in a stage of consolidation and adjustment. The market sentiment is still very strong, and the trading volume is at a high level, which is the best window period for thematic and concept-driven trends.

Coincidentally, the market is still in a period of dense policy issuance, and there is no shortage of themes and concepts. As long as there is a trend in themes and concepts, the market will have opportunities to make money, and the sentiment can be maintained. Sufficiently high sentiment provides a basis for the stock market's value discovery function, and the valuation center of high-quality leading stocks with fundamental logic can continue to rise, and the outline of a long-term, slow-bull market will begin to emerge.

Therefore, the current market is what all parties want. Slow cooking with low heat is what helps the high-quality development of the economy; high heat with oil, where companies make more money from stock speculation than innovation, makes the whole society more restless and is harmful to the real economy.

Since it is a market for consolidation and adjustment, it is unrealistic to expect a sharp rise in broad-based indices. Or, conversely, once broad-based indices rise sharply, they will face significant pressure to adjust. Similarly, during this period, thematic and concept-driven trends continue, but the probability of a single theme continuing to dominate is also low. It is more likely that multiple themes and concepts will rotate and rise, and for a single theme, after a significant increase, it will still face significant pressure to adjust.

Recently, the technology growth sector has risen sharply, achieving significant excess returns. At this point, it is not wise to continue to chase high. From the perspective of sector rotation, as the third-quarter reports are densely disclosed, performance may become a catalyst for short-term trends.

Combining the third-quarter performance forecasts, pig farming, securities, insurance, electronics, precious metals, and automotive industry chains are all expected to perform well. Combining the consensus expectations of Wind, the net profit growth expectations for the sectors of agriculture, forestry, animal husbandry, and fishery (1364%), computers (73%), electronics (66%), social services, commercial retail, national defense and military, non-bank finance, and automobiles in 2024 are all expected to grow by more than 30% year-on-year, which can be closely watched.

After the third-quarter report trend ends, the U.S. election is expected to become a short-term disturbance factor; then, the market focus will return to domestic stimulus policies and the verification of fundamental data.By that time, if the fundamental data is strong, the bull market will continue to unfold; if the data is not strong, it will force policies to be more robust, and the Central Economic Work Conference at the end of the year will become an important expectation, and the market can still continue.

In summary, there are no major risks in the A-share market in the fourth quarter, and there is no lack of money-making effects, which is a very friendly period for investors, and opportunities should be seized.

In terms of specific strategies, based on the ongoing bull market cycle, long-term layout is recommended: on one hand, it represents the future of China's economic transformation and can carry the imagination space and market enthusiasm of the bull market, with the typical representative being the Science and Technology Innovation 100 Index; on the other hand, it is the leaders of various sub-industries that have actually benefited from the economic reversal and have been climbing continuously, with the typical representative being the China A50 Index.