On Friday, the People’s Bank of China (PBoC) failed to meet market expectations by not cutting policy interest rates. However, just days later on Monday, it adjusted the 14-day reverse repo rate by 10 basis points (bps), setting it at 1.85%. Additionally, the PBoC has planned a press briefing with market regulators, raising the possibility of further monetary easing measures in the near future.
Despite this policy adjustment, the initial reaction from the Chinese stock market was tepid. The market did show some recovery on Monday, but it remains down year-to-date. These mixed reactions hint at uncertainties in the market, but a historical analysis offers a different, more optimistic perspective.
Historical Perspective on Bull Markets and Timing
Historically, after a prolonged bear market, it is common for stock prices to experience several false starts before a definitive bull run begins. Importantly, when this bull market does materialize, 50% of the total returns tend to be captured within the first 10% of the time. Therefore, timing is critical for investors. Missing out on this initial surge could mean losing a significant portion of potential gains. This situation has played out before in the Chinese market, prior to the beginning of two significant bull markets.
Gold as a Measure of Value
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