Market Review - From May 19 to 23, the equity market showed a significant pullback after a rise, with the Wind All A closing at 5075.37, down 0.63% from May 16[8] - The China Securities 2000 index reached a historical high of 2.89 in trading volume ratio, indicating a crowded small-cap market, which led to a notable decline post-May 21[11] - The overall market experienced a near "broad decline" on May 23 due to profit-taking concerns as large-cap stocks also faced high gains since May[1] Overseas Market Impact - Moody's downgraded the U.S. credit rating, raising concerns about the U.S. budget deficit, which reignited the "Sell America" trade, causing U.S. stocks to decline by approximately 2.47%[26][29] - U.S. long-term bond yields surged, with the 10-year and 30-year yields rising to 4.508% and 5.030%, respectively, reflecting market skepticism about U.S. debt sustainability[26][27] Strategy and Historical Insights - Historical data shows that after the release of crowded small-cap risks, the index tends to recover significantly, with past recovery durations averaging 27 to 40 days and corresponding gains of 19.02% to 37.56%[31][38] - The current market conditions suggest that if the index continues to adjust, potential declines for the China Securities 2000 could range from 15.22% to 34.54% based on historical patterns[35][37] Bond Market Dynamics - Convertible bond valuations have shown structural changes, with equity-type bonds declining while debt-type bonds have risen, indicating a shift in investor sentiment[19] - As of May 23, the valuation center for bonds with an 80 yuan par value was 46.45%, reflecting a slight increase from the previous week, while the 130 yuan par value saw a decrease to 7.11%[19][24]