On August 19, the market experienced a sharp decline with significant trading volume, with the ChiNext and STAR Board indices falling particularly hard by over 5%, while the Shanghai Composite Index also dropped more than 2%, breaching the 3900-point mark.

Today's market decline can be attributed to two main factors. On one hand, investor confidence was severely shaken following the substantial market drop in July. Although a rebound began in August, confidence had not been fully restored. As the market bounced, some investors lacking conviction began to sell off, triggering a sharp short-term selloff. Market corrections typically do not complete in a single move, but rather involve repeated pullbacks before the full adjustment concludes. On the other hand, today's decline was also influenced by a significant drop in the Nasdaq overnight, particularly in the chip and semiconductor sector, where some US-listed stocks fell by more than 10%, impacting technology stocks domestically.

However, the nature of this decline is entirely different from the consecutive sharp drops seen in July. If we compare July's crash to an earthquake, this correction is merely an aftershock, so the sustainability of this decline is expected to be limited. While there may still be some inertial downward adjustment in the coming days, it is highly likely that we will not see consecutive severe drops like those in July. This decline serves to release valuation bubble risks and could actually facilitate an earlier market bottom and recovery.

From a market perspective, this could potentially form a W-bottom pattern, or a double-bottom retest, which makes this market decline easier to understand. Due to weak investor confidence, panic selling was clearly evident during the drop. Today's substantial market decline is closely related to the concentrated selling by panicked investors. Panic selling has a significant impact on short-term market trends, even leading to a scenario where bullish investors sell off to hedge risks due to concerns about sharp short-term market declines.

Looking ahead, investors need to focus on two key aspects. First, whether the US stock market will experience consecutive declines overnight; if it can stabilize and rebound, it will be beneficial for the A-share market to find its footing. Second, attention should be paid to market style rotation. When technology stocks experience sharp declines, some traditional sectors tend to see a certain degree of recovery.

Previously, I recommended a "three-step" strategy to mitigate market downside risks: resolutely deleveraging, appropriately reducing positions, and balancing investments between technology and dividend-yielding sectors to diversify risk. When technology stocks fall, dividend stocks often have rebound opportunities, which can hedge against the pullback risk of betting on a single sector. I strongly oppose betting on a single industry or sector; it is essential to reduce portfolio volatility through diversification. Otherwise, significant fluctuations in market value could occur, impacting investor confidence.

What is clear now is that this decline is smaller in magnitude compared to July's drop, so there is no need for excessive concern. After a short-term inertial adjustment, the market is likely to stabilize and rebound. July's crash had already squeezed out much of the valuation froth. Additionally, this decline remains a short-term adjustment, not a bubble burst or the end of the bull market. Therefore, the market is still expected to maintain a range-bound trend, with the possibility of a sustained one-way decline being quite low.

In July, RMB loans saw a net decrease, indicating that credit demand from households and enterprises remains weak, while RMB deposits continued to increase. This suggests that while the central bank maintains a low-interest-rate, accommodative liquidity environment, loan demand from households and enterprises is not strong due to lack of confidence. Particularly, the ongoing adjustment in the real estate market has dampened demand for mortgage loans, affecting loan growth. Enterprises are also cautious about the future, resulting in slower loan growth. Conversely, deposits continue to rise as consumer confidence remains weak, leading to precautionary savings. Therefore, promoting the shift of household savings into the capital market remains a major trend. The current low-interest-rate environment makes it difficult for monetary policy to raise rates; however, weak investment appetite from households and enterprises also prevents much of the loose liquidity from being deployed. This is the objective macro environment we currently face.

Regarding gold, prices have experienced some volatility recently. On one hand, international geopolitical tensions remain highly uncertain. On the other hand, interest rates in several overseas countries remain elevated, and the Federal Reserve is hesitant to cut rates prematurely to prevent price increases, all of which affect international gold prices. In the long term, international gold prices still have upward conditions, as de-dollarization remains a major trend. However, after a significant rebound, some short-term consolidation is possible. When international gold prices fell below $4,000 per ounce earlier, dropping to as low as $3,800, I mentioned that levels below $4,000 might represent a good allocation opportunity. Now that prices have returned above $4,000, the trend has become more volatile.

One of the main factors currently influencing gold prices is whether the Fed will raise or cut rates in September, which will have a significant impact on gold's trajectory. My assessment is that the Fed is more likely to maintain the status quo in September rather than raise or cut rates now. The Fed is in a dilemma: raising rates could puncture the US tech bubble, while cutting rates could reignite inflation. Thus, the Fed may continue to keep rates unchanged. Additionally, attention should be paid to developments in the Middle East, whether the US and Iran can reach an agreement through negotiations, and when the Strait of Hormuz will be reopened, as these will also have a noticeable impact on gold prices.

In this round of adjustment, technology stocks have undoubtedly been the hardest hit, as they have greater elasticity—leading the rally when markets rise and leading the decline when markets fall. This is an inherent characteristic of tech growth stocks. Against the backdrop of economic transformation, technological innovation is certainly a beneficiary direction. However, the scenario seen in the first half of the year, where all technology stocks rose broadly, is unlikely to recur. Going forward, there will be significant divergence. Tech leaders that can secure orders and deliver earnings may continue to rebound or even hit new highs, while tech stocks driven by themes and concepts may struggle to rally again. Therefore, the next phase will see pronounced differentiation among technology stocks.

Compared to the first half of the year, the investment logic for tech companies has shifted significantly, with a focus on whether they can actually deliver earnings. Sectors with insufficient earnings may face pullbacks. For instance, the humanoid robot sector, despite its huge future growth potential, has not yet released earnings, so it could see sharp declines during corrections without strong capital support. Today, there was significant positive news in China's commercial aerospace sector, with the Zhuque-3 rocket successfully achieving land recovery, a historic milestone. However, the commercial aerospace sector did not rally significantly on this news, indicating that sectors without released earnings cannot sustain gains even with short-term positive catalysts. During market adjustments, investor sentiment is fragile, and they need to see tangible earnings delivery before committing to heavy positions. Merely short-term conceptual catalysts are hard to sustain. This also highlights that investing in tech stocks in the second half of the year will be considerably more challenging than in the first half.

Investors must put more effort into position management and risk control. Sectors such as chip semiconductors, computing power, and algorithms are expected to remain key focus areas of this AI technology bull market, with strong earnings delivery capabilities—they have been standout performers in the first half of the year. However, they are unlikely to be immune during market adjustments. In the medium to long term, the development trend of the technology industry remains unchanged. After the current adjustment is completed, these sectors may regain upward momentum.

On the other hand, the dividend stability of high-yield assets is gaining attention from investors, and dividend stocks may see some favorable performance. Balancing investments between technology and dividend-yielding sectors remains a sound investment strategy and an important approach to navigating market style rotation.