Source: China brokerage, original title "Across the board selling! What happened?"

Author: Shi Qian. Will this be the arrival of the "real wolf"? The consumption tax rumors suddenly spread in various investment groups yesterday after the close of trading. There are reports that a trillion-level consumption tax reform will be approaching, and luxury goods and high-end services may be the first to test. As of the close of trading this morning, consumer stocks suddenly rebounded collectively, and retail and duty-free areas led the rise. Among them,

After a year and a half of sharp rise, global stock markets have recently weakened significantly. Although there are still many people expecting "rate cut trading", the past year and a half of upward momentum is also a type of trading with rate cuts.

Today, the entire Asia-Pacific market has weakened again. Japan's stock market has dropped by more than 1%, and the Nikkei 225 index has fallen nearly 7% since July 11. The stock markets of South Korea, Singapore, and Malaysia have also shown fatigue recently. At the same time, from the exchange rate market, the US dollar against the yen has reached its lowest level since May. From the perspective of various adjustments in the Asia-Pacific market this year, the appreciation of the yen seems to be a triggering factor.

In addition, the Europe Stoxx 50 index fell 1.1%, the German DAX30 index fell 0.95%, the France CAC40 index fell 0.96%, and the UK FTSE100 index fell 0.67%. US futures remain bearish, with NASDAQ futures down nearly 1%, Dow Jones futures down 0.46%, and S&P 500 index futures down 0.65%.

In fact, over the past year, there have been many cases of peripheral bigwigs such as Huang Renxun, Zuckerberg, and Bezos cashing out in the rising stock market. Stock god Buffett's interest in stocks has also declined. In 2023, his Berkshire sold about $24 billion worth of stocks, and began selling Apple heavily in the fourth quarter of last year, with cash reserves reaching a new high. So what is the logic behind this, and how will the trend evolve?

Overall market decline

On July 24th, the Japanese stock market fell sharply, with the Nikkei 225 index falling more than 1.2%. Since reaching its peak on July 11th, the index has continued to decline, with a drop of nearly 7% as of today.

At the same time, the yen exchange rate continued to strengthen. Today is the third consecutive trading day that the yen has strengthened, and the US dollar against the yen has fallen below the 155 level. Traders are looking forward to the Bank of Japan's policy meeting next week, and it is widely believed that the Japanese government will support the yen. According to Bloomberg's survey, only about 30% of Bank of Japan observers predict that the authorities will raise interest rates on July 31, but more than 90% believe that there is a risk of interest rate hikes.

Today, except for the Japanese stock market, the markets in South Korea, Hong Kong, China, Singapore, Malaysia, and even Australia are showing relatively weak trends. In addition, various types of futures in the United States and Europe are also performing poorly.

From the trend point of view, the day when the US dollar against the yen fell sharply was also on July 11. Therefore, the yen has a relatively high negative correlation with Japanese stocks recently. At the same time, global equity markets have also begun to show obvious fatigue. Analysts believe that the yen has played a relatively significant role in this process. With the appreciation of the yen, on the one hand, the frequency of the repo rate of interest swaps based on the yen will begin to decrease. The global market will have an action to retract liquidity and return Japanese yen. On the other hand, as the yen appreciates, market expectations for Japan's exports and tourism industry will decline, and expectations for cash flow into investment will also weaken. Therefore, the yen may be an important reason for the weakness of equity markets.

JP Morgan released a research report stating that the Japanese government may launch more economic policies this fall to support the stock market. Before the US presidential election and the election of the LDP leader in September, the stock market may become turbulent. Analysts, including Rie Nishihara, JP Morgan's chief Japanese stock strategist, wrote in a report that the Japanese government may announce policies that contribute to the improvement of actual wages. Policies related to wage growth, corporate pension reform, and cross-shareholding may be determined and implemented before the government change after the LDP election. However, it is expected that the update of Japan's energy policy may drive the pace of restarting nuclear power facilities, which is beneficial to related stocks.

Entering a turbulent period?

Although the world is still expecting the Fed to cut interest rates, global stock markets have actually entered a turbulent period since Trump was attacked. This is actually because the previous market has reflected a lot on the rate cut, and major markets around the world have a large increase, accumulating a certain amount of bubble. So, in this troubled autumn, how will equity markets develop?

According to Guosen Futures' statistics, both the Hang Seng Index and the three major US stock indexes performed best in the year before the interest rate hike. In the year following the interest rate hike, the performance of Hong Kong stocks was slightly better than that during the interest rate cycle, while the US stocks showed a trend of slightly stronger performance during the interest rate cycle than after it ended. The current short-term trend of US stocks is facing a stage of adjustment and style switching. Dow Jones has been stronger than NASDAQ recently and the overall volatility has also risen. It seems to have entered a period of questioning the growth rate of earnings per share.

Guosen Securities believes that from the perspective of prices, technology giants have generally reached the '12-month target price' given by Wall Street, which can trigger stable profit-taking in history. From the perspective of fundamentals, even if the most optimistic quarterly performance expectations are adopted, the implied PE ratio has also reached the historical maximum level. However, the space for this round of correction will not be large, and the position of buying can refer to the position of NASDAQ 100 from the 60-120 day moving average.

However, judging from the actions of the big players, the global market seems to be entering a garbage time.

On July 3, Jeff Bezos, the founder of the US e-commerce giant Amazon, revealed a plan: he will sell another 25 million shares of the company's stock, worth $5 billion.

According to incomplete statistics, Huang Renxun, the founder of NVIDIA, has sold more than 10 times in the past month, with a total cash-out amount of more than $0.2 billion (approximately RMB 1.45 billion).

Buffett has also been selling stocks recently. According to the securities filing disclosed by Berkshire Hathaway on July 19, the company has sold about $1.5 billion worth of Bank of America stock. Based on past experience, when Buffett starts to reduce holdings of a certain stock, he often continues to do so. This is also the case with his operations on US Bancorp, Wells Fargo, Bank of New York Mellon, HP and BYD.

Editor/Emily