Group 1 - The article discusses the duration of stock market cycles, indicating that a complete bull and bear market typically spans 3 to 5 years [2] - It highlights specific years when significant market uptrends occurred, such as 2021, early 2018, 2015, 2010, and 2007, with varying degrees of market strength [2] - The article notes that only a minority of investors manage to earn profits from stock funds over a complete market cycle due to the long intervals between significant market movements [2] Group 2 - Frequent trading is mentioned as a factor that increases transaction costs for investors, which in turn reduces overall returns [2]

Core Viewpoint - The article discusses the cyclical nature of the A-share market, particularly focusing on the consumer sector's performance through various bull and bear markets from 2006 to 2025, highlighting significant events and their impacts on market valuations. Group 1: First Bull and Bear Market (2006-2008) - In 2006 and 2007, the A-share market experienced its largest bull market in history, with the Consumer 50 Index rising over 5 times [3] - The bull market was short-lived, as the 2008 financial crisis led to a global stock market decline, causing the Consumer 50 Index to drop over 70% within a year [3] Group 2: Second Bull and Bear Market (2008-2014) - Following the 2008 crisis, a 4 trillion yuan stimulus plan in 2009 initiated a small bull market lasting until around 2011, with the consumer sector increasing by more than 100% [5] - From 2012, rising interest rates began to suppress the A-share market, leading to a decline in the consumer sector, exacerbated by food safety concerns stemming from the liquor plasticizer incident [6][5] - By 2014, the consumer sector's valuation reached historical lows [7] Group 3: Third Bull and Bear Market (2014-2018) - Starting in the second half of 2014, continuous interest rate cuts led to another bull market, with the consumer sector rebounding for over four years [8][9] - However, in 2018, trade policy impacts caused a market downturn, resulting in the consumer sector being undervalued by year-end [10] Group 4: Fourth Bull and Bear Market (2018-2025) - Beginning in 2019, the consumer sector entered its fastest-growing bull market, with the Consumer 50 Index nearly doubling in value [11] - This period also saw significant valuation bubbles forming within the consumer sector [11]

Core Viewpoint - The article discusses the importance of historical data in understanding market cycles and the impact of index rule changes on valuation metrics. Group 1: Historical Data Reference - Historical market cycles typically last 7-10 years, making it essential to consider longer time frames rather than just 2-3 years to avoid incomplete analysis [2]. - It is recommended to find similar style indices with longer histories for reference, as they tend to exhibit similar performance patterns during different market phases [3]. Group 2: Index Rule Changes - Changes in index rules can lead to significant valuation shifts, making historical valuation data less relevant [5]. - For example, the change of the CSI 100 index name to CSI A100 altered its selection criteria from market capitalization to a leading stock strategy, affecting its valuation [5]. - The H-share index's transition from 40 to 50 stocks, including more internet companies, also resulted in a loss of reference value for historical valuations [6]. Group 3: Valuation Calculation Methods - Different weighting algorithms in index valuation can lead to changes in percentile rankings, impacting the perceived valuation metrics [6]. - The CSI Dividend Index's shift from market capitalization weighting to dividend yield weighting significantly altered its composition, affecting its valuation calculations [8][9]. Group 4: Economic Downturns - During economic downturns, declining profits can lead to an increase in price-to-earnings (P/E) ratios, which may not reflect actual stock price increases [11][13]. - For instance, small-cap indices like CSI 1000 and CSI 2000 have experienced profit declines over the past two years, necessitating the use of stable financial metrics for valuation [14]. - In cases of unstable or declining profits, the price-to-book (P/B) ratio may serve as a more reliable valuation metric [15].

Core Viewpoint - The article discusses the current state of the A-share and Hong Kong stock markets, emphasizing the importance of corporate earnings growth as a key driver for market recovery and the cyclical nature of economic conditions affecting market performance [6][28][30]. Market Overview - A-shares have shown resilience, with an overall increase and a rating of 4.9 stars, indicating limited downside potential [2][29]. - The Shanghai and Shenzhen 300 indices have seen slight increases, while mid and small-cap indices like the CSI 500 and CSI 1000 have performed better [3]. - The healthcare sector remains strong, while the banking index recently hit a historical high before experiencing a pullback [4]. Economic Cycles and Market Behavior - The duration of bull and bear markets is often linked to economic cycles, with prolonged bear markets typically occurring during economic downturns [8][14]. - Historical examples from the U.S. stock market illustrate that long bear markets can last up to a decade during economic recessions, while shorter bear markets can occur during economic expansions [16][23]. - The article notes that the current economic downturn in A-shares is largely due to significant deleveraging in the real estate sector, which has affected consumer spending and overall economic health [25][27]. Future Outlook - The article suggests that the current economic downturn will eventually end, as economic cycles are characterized by fluctuations rather than prolonged stagnation [28]. - Indicators such as corporate earnings growth are crucial for assessing market recovery, with A-shares showing a year-on-year earnings growth of approximately 4-5% in Q1, while Hong Kong's Hang Seng Index saw a more pronounced recovery with a 16% growth [28]. - Different sectors are expected to recover at varying rates, with technology and healthcare showing early signs of recovery compared to consumer sectors [28][32]. Investment Strategy - The article emphasizes that the market's upward potential relies on corporate earnings recovery, with a need for sustained growth to drive valuations higher [30][31]. - The current market rating of 5 stars suggests a strong valuation floor, with institutional support likely to mitigate volatility during downturns [29].

Core Viewpoint - The article emphasizes the importance of percentile as a reference indicator when investing in index funds, suggesting that low percentile investments may present potential opportunities [1][6]. Summary by Sections Percentile Types - There are two types of percentiles: 1. **Time Percentile**: Indicates the current valuation's position within historical valuations over a specific time frame. For example, if the current valuation is lower than 90% of the valuations in the last five years, it is at the 10th percentile [3]. 2. **Space Percentile**: Represents the current valuation's position between the historical minimum and maximum valuations. For instance, if the historical minimum P/E ratio is 10 and the maximum is 50, a current P/E of 20 would place it at the 25th percentile [4]. Practical Investment Considerations - Time percentiles are more commonly used in actual investments, but relying solely on percentiles carries risks [5]. Risks of Relying Solely on Percentiles - **Risk 1**: Short index launch time can lead to low historical valuation reference value. For example, newly established indices may not provide a reliable bottom valuation due to limited historical data [9][10]. - **Risk 2**: Changes in index rules can significantly alter valuation data. For instance, the change in the China Securities 100 index from a market-cap-based selection to a leading strategy can affect historical valuation references [12][13]. - **Risk 3**: Different weighting algorithms for valuations can lead to changes in percentiles. For example, the China Securities Dividend Index's shift from market-cap weighting to dividend yield weighting has resulted in discrepancies in reported P/E ratios [14][18]. - **Risk 4**: Significant fluctuations in earnings can cause P/E percentiles to become misleading. For instance, if a company's earnings surge, the P/E ratio may appear low, creating a "value trap" scenario [20][21]. Conclusion - Investments with low percentiles are worth researching, but low percentiles do not guarantee undervaluation. Factors such as short historical data, changes in index rules, different valuation algorithms, and earnings volatility can lead to percentile failures, necessitating a detailed analysis of each situation [25][26].