This week marks the final trading week before the Spring Festival. As anticipated, the period around the holiday often brings a "red envelope" market rally. On Monday, markets experienced a significant surge with heavy trading volume. The Shanghai Composite Index rose 1.41%, reclaiming the 4100-point level, with approximately 4600 stocks advancing. The Shenzhen Component Index gained 2.17%, closing above 14000 points, while the ChiNext Index jumped 2.98%. The STAR Market and ChiNext boards led the gains, significantly boosting market profitability and dispelling the gloom from last week's continuous adjustments. This movement validates the earlier prediction that following the year-end rally, markets would gradually build momentum for a spring offensive, which is a seasonal characteristic of A-shares.
During the Spring Festival, as people visit relatives and friends, inquiries about last year's investment returns become a popular topic. This tends to further spread the wealth effect and attract more capital into the market after the holiday. Monday's rally was broad-based, providing opportunities for both technology and traditional sectors. Areas such as semiconductors, computing power and algorithms, and space photovoltaics performed notably well.
Positive developments from Elon Musk regarding space photovoltaics have strengthened the overall performance and attention on the photovoltaic sector. Tesla is evaluating sites across the United States, planning to expand its solar cell manufacturing business with a goal to achieve 100 gigawatts of annual solar manufacturing capacity within three years, boosting output through a combination of expansion and new construction. Musk's strategy reinforces the long-term rationale for space photovoltaics, driving strength across the entire photovoltaic industry chain. Concurrently, the commercial aerospace sector also saw gains, primarily fueled by the long-term prospects linking space photovoltaics with AI computing power.
Recently, a strong rally in U.S. stocks, with the Dow Jones Industrial Average surpassing the 50,000-point milestone, has boosted market sentiment and confidence. Companies issuing annual performance forecasts, particularly leading tech firms reporting outstanding results, have further bolstered investor confidence in technology stocks. Assets with strong earnings certainty have become the focus of capital inflows. The strengthening market indicates that the recent adjustment phase may be nearing its end, potentially transitioning into a new upward cycle, with the broader market showing sustained performance.
Markets experienced volatility on Tuesday, although the STAR 50 Index posted significant gains while other sectors fluctuated. Overall, market profitability has improved markedly compared to earlier periods, and investor confidence has been effectively reinforced. Recent trading volumes have declined relative to previous peaks, which is normal as the Spring Festival approaches and some investors begin holiday preparations early. However, compared to volumes of only several hundred billion in 2024, current trading activity frequently reaching around 2 trillion yuan indicates that investor participation remains relatively active.
The ongoing slow-bull, long-bull market, which began on September 24, 2024, is supported by strong policy backing on one hand, and on the other, by incremental funds from the shift of household savings into capital markets, alongside foreign capital inflows boosting investor confidence. These factors collectively support the continuation of this sustained bull market. As the Year of the Snake concludes, the Year of the Horse begins. In the coming year, markets are expected to maintain their upward trajectory, with the wealth effect likely to spread further. Therefore, for investments in the Year of the Horse, investors may consider adopting a more balanced allocation strategy.
Technology stocks are anticipated to remain leading performers, as 2026 marks the start of the 15th Five-Year Plan period, keeping attention on the technology and innovation sector high. Meanwhile, other sectors are expected to see rotational opportunities, including non-ferrous metals, defense, new energy, and previously underperforming consumer blue-chips, all of which may experience轮动. The expansion of profitability across more sectors is a characteristic of a normal bull market. A rally confined to a single sector is often seen as an early bull market phase; the current environment, with active rotation across multiple sectors and gradually strengthening investor confidence, can be viewed as the mid-phase of a bull market.
It has been previously stated that this slow-bull, long-bull market carries three historical missions, necessitating a broader perspective. The first mission is to stimulate consumption through the market rally. Rising asset values provide investors with property income, effectively boosting household consumption and driving economic recovery. The enhanced consumption capacity and confidence among investors benefiting from the bull market are more effective than distributing consumption vouchers or subsidies. The second mission is to stabilize and revive the property market, as some investors realizing gains may seek to improve their living conditions through property purchases, thereby supporting the real estate sector. The third mission is to enable more technology innovation companies to access capital markets via IPOs, securing crucial funding. Just as "there would be no Silicon Valley without Wall Street," capital market support, particularly a strong secondary market, is vital for technological innovation. A bull market allows more tech firms to go public, providing exit channels and profits for PE/VC investors, which in turn incentivizes further support for innovative enterprises.
The trend of household savings shifting towards capital markets is becoming increasingly evident. Recent roadshows and reports at various banks revealed that a significant amount of time deposits matured in January. However, following a market rally and subsequent correction that month, some investor confidence waned. A portion of these matured funds flowed into wealth management or insurance products rather than capital markets. This indicates that the pace of the savings shift is closely tied to short-term market performance. When markets are strong, a larger share of maturing funds tends to seek opportunities in capital markets through direct stock purchases or fund investments.
It is estimated that approximately 50 trillion yuan in time deposits will mature throughout the year. Investors with lower risk appetite may opt to renew deposits, accepting annual interest rates around 1.0%. Those seeking higher returns may allocate to bond funds, hybrid funds, or equity funds. Among them, investors with higher risk tolerance may enter the market through equity-focused funds.
Recently, international gold and silver prices have experienced significant volatility, surging sharply before a rapid pullback and subsequent fluctuations, marking a short-term consolidation phase. Long-term drivers supporting higher gold prices remain intact, including persistent U.S. dollar oversupply and rising U.S. government debt, which have weakened confidence in the dollar. Amid "de-dollarization" trends, more investors, including central banks of various countries, may increase their allocation to physical gold. It's worth noting that central bank purchases constitute a small portion of total gold production; the recent price surge was primarily driven by financial capital, which also contributes to larger price swings during corrections.
Gold possesses both monetary and financial attributes, leading to considerable price volatility—a point investors should note. The recommended strategy for gold investment remains treating it as an asset for allocation rather than focusing excessively on short-term fluctuations. Allocating around 20% of a portfolio to gold-related assets can be an effective hedge against inflation and currency depreciation. This rational approach views gold and silver as long-term holdings rather than vehicles for speculative short-term trading.
Overall, markets are poised to launch a spring offensive, with profitability expected to improve. As the Year of the Horse approaches, best wishes for success, good health, and prosperous investments in the new year.