Cinda: Liquidity and inflation are the core of stock market volatility in the US.

Cinda released a research report stating that since November, the US stock market has been continuously weakening, and the volatility of A shares has also increased. The recent increase in volatility in the US stock market is mainly due to the tightening of overseas liquidity environment, a decrease in market risk appetite, and a significant divergence and doubts about the level of AI bubble in the market. However, the bank believes that the core factors affecting the volatility and duration of overseas markets are currency and inflation, and the impact of profits may not be the most important. Given that the current valuation of A shares is significantly lower than that of US stocks, the influence of foreign capital has weakened, and the impact of the weakening US stock market on A shares may gradually decrease. There may still be opportunities for A-share upward movement from the end of this year to early next year due to positive changes in policies or funding. Cinda's views are as follows: There are three main reasons for the recent increase in volatility in the US stock market: (1) the tightening of the overseas liquidity environment. Hawkish comments from within the Federal Reserve, strong September nonfarm payrolls and inflation data, and cooling expectations for a December rate cut. (2) Decreasing market risk appetite. Federal Reserve officials publicly warn of risks in the private credit sector. Cryptocurrency adjustments and increased selling pressure from CTAs. (3) There is still significant divergence and doubts in the market about the level of AI bubble, leading to some institutional investors taking profits. Looking at the current level of AI bubble from the perspective of valuation and financial pressure, the S&P 500 P/E ratio is in a high range and close to the peak of the dot-com bubble, the Nasdaq index P/E ratio is not low, but still far from the peak of the dot-com bubble. The market value concentration of leading technology companies in the US stock market is high, the P/E ratio is generally high, financial pressure is close to the level of the dot-com bubble period, some companies are beginning to take on large-scale debt financing, and there may be increased uncertainty in buybacks and dividends, which could be an intrinsic reason for the short-term adjustment of the US stock market. The easing of this concern may require sustained downstream performance realization. However, we believe that the core factors affecting the volatility and duration of overseas markets in this round are currency and inflation, and the impact of profits may not be the most important. The probability of the Federal Reserve continuing to cut interest rates in 2026 is higher, and the likelihood of a burst of the valuation bubble due to aggressive rate hikes is not high. Looking at a longer-term perspective, the most important factor affecting the sustainability of the slow bull market in the US is persistent low inflation. The main reason behind the continuous strength of the US stock market since the end of October 2022 may not be changes in profits, but the impact of easing inflation. The standard for the end of this current rise in US stocks may be a significant increase in commodity prices. Given that the current valuation of A shares is significantly lower than that of US stocks, the influence of foreign capital has weakened, and the impact of the weakening US stock market on A shares may gradually decrease. There may still be opportunities for A-share upward movement from the end of this year to early next year due to positive changes in policies or funding. Risk factors: Unexpected sharp decline in the real estate market, severe volatility in the US stock market, historical patterns may fail.