Nasdaq Plunges 538 Points, Metaverse Leader Loses $1.5T, A-Share Woes Begin

Traditionally, A-shares have followed the trend of rising but not falling. When U.S. stocks surge, A-shares remain calm, but when U.S. stocks plummet, A-shares rush to exit. The Spring Festival according to the lunar calendar has not yet ended, and the violent fluctuations in the global stock market have cast a shadow over the A-shares that will open next Monday.

During the Spring Festival, U.S. stocks have been quietly soaring. Starting from the lowest point of the Dow Jones Industrial Average after the Federal Reserve's January meeting, up until yesterday morning, they have risen by 1,800 points. If A-shares were to open under these circumstances, it is believed that they would welcome a bullish start.

However, reality does not align with expectations. What should A-shares do?

01, U.S. Stocks Plunge

Today, at the close of the U.S. stock market, all three major indices fell. The Dow Jones Industrial Average dropped by 1.45%, the S&P 500 Index fell by 2.44%, and the Nasdaq Composite Index plummeted by 3.74%. The Nasdaq's decline of 538 index points erased much of the gains made in the previous few days.

A drop like this for the Nasdaq would be considered significant at other times, but last night was different. Even with a 3.7% decline, it pales in comparison to the drop experienced by Meta Platforms, the parent company of Facebook.

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Facebook rebranded last October and made a grand entrance into the metaverse, becoming the industry's leading company. In the past four trading days, its stock price also rose along with the Nasdaq, but by the close on February 2nd, it had already shown signs of a high-level retreat.

From last night to this morning, the company's stock price suddenly plummeted, closing down by 26.39%. A quarter of its market value vanished, amounting to $237 billion, equivalent to 1.5 trillion yuan.

Other large U.S. technology stocks also saw significant declines, with Amazon, Netflix, Microsoft, and Google all being affected.

Chinese concept stocks listed in the U.S. also mostly closed lower, with several new energy companies that had been performing well in the previous two days also experiencing declines.However, I believe that after several days of significant increases in the US stock market, a certain degree of pullback should be considered a relatively normal state. In fact, when we look back at the US stock market decline in late November, a similar trend occurred. At that time, the World Health Organization announced the emergence of the Omicron variant, leading to a rapid decline in the US stock market. But then, as emotions eased, the US stock market also experienced a surge of 1,800 points over four consecutive trading days, followed by a pullback.

This time, it is also an adjustment after a rapid increase, and it is estimated that before the Federal Reserve meeting in March, the US stock market in February should be relatively calm, in a state of slow growth.

02, Asia and Europe decline

The decline in the US stock market is actually just a continuation of the closing of the Asian and European markets.

Yesterday, after the Japanese stock market opened, it had already fallen by 1%, and it remained at a low level throughout the day, closing down nearly 300 index points. After the Japanese stock market closed, I also made a brief comment in the article and predicted that the European and American stock markets, which opened in the evening, might also experience adjustments.

Sure enough, last night, the European stock market also fell, with the UK's decline not being too significant, only down by 0.7%, but the declines in Germany and France both exceeded 1.5%.

Everyone is focusing on the US inflation data, but the inflation in the eurozone and the UK is also relatively high. Compared to the euro's indecisiveness, the UK is more straightforward. Yesterday, the Bank of England announced an interest rate hike.

In December last year, UK inflation had already risen to a 30-year high, and it can be expected that this year, the Bank of England will also significantly tighten monetary policy, with the number of interest rate hikes possibly being 3 to 5 times. Under the influence of the UK's interest rate hike, the European Central Bank's stance has also begun to change. Lagarde believes that inflation in the eurozone may continue for a relatively long time, implying that there is no exclusion of the possibility of an interest rate hike.

03, Commodity performance

In this inflationary situation, the trend of gold has been relatively weak. For several months, the price of gold has been slowly rising and rapidly falling. It is not easy to rise, but it is quickly brought back to its original state within a few trading days.China is in the midst of the Lunar New Year holiday, during which the consumption of gold is relatively high. However, this will not have a significant impact on international gold prices. Please do not believe that Chinese aunties can drive up the price of gold.

The United States is raising interest rates, and the US dollar continues to appreciate, which will naturally suppress gold prices. A more important factor is that gold trends are long-term cycles; after several years of consecutive increases, they often lead to several years of consecutive declines. It appears that gold is still in a downtrend.

On the other hand, as inflation expectations intensify, the price of crude oil keeps reaching new highs. Currently, the price of crude oil has already broken through $90.

In the past month, the best-performing domestic public funds have been QDII funds invested in crude oil, with a rise of more than 10% in just one month. Compared to the decline of most other funds, the performance of these QDII funds is very eye-catching.

Previously, I specifically analyzed five of these types of funds in articles and videos, some invested in stocks related to crude oil, and others invested in overseas ETFs related to petroleum. When choosing, pay attention to the differences between them.

However, it is also important to remind everyone that the possibility of falling from $90 to $70 is far greater than rising from $90 to $110. If you are only now buying crude oil funds at high prices, the risk is increasing.

At the end of the article, the Japanese stock market has been open for one hour. After starting low, it has risen and is now at a flat level. It is estimated that the fluctuation range of the Japanese stock market today will not be too large.

Next, we wait for Hong Kong to open.

These may all be related to the performance of A-shares next Monday. I hope that in the new year, A-shares will no longer disappoint investors.