Wild Week! Global Stock Markets, Boom and Bust! Panic or Calm? Let's Look at Historical Answers

Global stock markets have entered a wild week, with major indices fluctuating wildly, with huge price swings of hundreds of points. The "matching tariff" imposed by the US has become the biggest bearish factor for the market.

In fact, any extreme situation can occur in the stock market. By flipping through the history books, you will see that once upon a time, the Dow Jones index fell more than 22% on a single day - it was October 19, 1987, when the US stock market experienced a big crash; in 1997, during the Asian financial crisis, the Hang Seng Index fell 13.7%, with some individual stocks plummeting by over 50%.

Even if the stock market experiences its most severe downturns, it will eventually recover its losses. For long-term investors who have prepared both psychologically and financially, extreme price swings cannot cause real harm. By reviewing the history of the capital market, we can see that during each market crash, investors who took a contrarian approach or held onto undervalued quality companies often ended up with substantial profits. What's important is that investors need to take care of their own affairs, invest in the right companies, and avoid using leverage funds, short-term funds, or funds that cannot withstand losses.

Investments require stable profit expectations, otherwise, stock prices will face "Davis Double Kill" (a term coined by Warren Buffett). Can Chinese enterprises withstand the extreme pressure of being disconnected from the US?

Extreme measures cannot break the wings of excellent companies. Huawei is a classic example. During the 8-year trade tensions with the US, Huawei was effectively "disconnected" from the US. However, according to its 2024 financial report, its revenue scale has approached historic highs, and income from the Americas accounts for only 4.2%. Huawei shows us that even under US pressure, companies can become stronger by focusing on their own affairs.

The concept of "deep excavation" and "low tide" is a set of rules that Li Bing (the father of the Duke of Zhou) left behind for his son. It is also one of Huawei's operational principles, which applies to investments as well. Whether it's a bull or bear market, investors who use long-term funds to buy undervalued quality companies can hardly lose.

Panic will eventually come to an end. What's truly important is that investors make long-term preparations psychologically and financially and invest in the right companies.

When panic sets in, don't listen to people who stir up fear. In 2005, when the Shanghai Composite Index hit a record high, many investment gurus praised the stock market reform plan as "a bucket of garbage given to you two buckets", but that was completely wrong. Many savvy investors took advantage of this opportunity and laid out their plans.

In 1987, when the US stock market experienced a big crash, many investors thought it would be a replay of the 1929 Great Depression. However, by the end of 1987, the market had already turned around.

As of April 7th, Wall Street financial institutions have raised their forecasts for China's economic growth, looking favorably on the Chinese capital market and viewing it as a safe haven against US uncertainty. The A-share market has been relatively stable in the face of significant geopolitical and currency changes, with low correlation with global stock markets, making it a preferred choice for global risk-averse funds.

The A-share market is currently at its historical low point, with an attractive dividend yield. At this time, large funds entering the market not only play a stabilizing role but also provide a long-term investment return rate that will not be disappointing.