Investment Insights | Behind Market Volatility: Is it Excessive Panic or an Actual Crisis?

(Source: Guojin Securities, Hour 5)

Dear Investors:

After the market closed yesterday (March 19), many people’s hearts were still hanging—overseas tensions are tense, and A-shares are under pressure simultaneously. Is this just an overreaction of panic, or is a real crisis already upon us?

We previously pointed out that two factors are currently suppressing market risk appetite: one is the fragility behind the “temporary stabilization” of geopolitical conflicts, and the other is the uncertainty surrounding the Federal Reserve’s March policy meeting. Yesterday, the evolution of these two variables is worth examining, and the reaction of A-shares may be more rational than it appears on the surface.

PART 01

Anxiety Origins: Overseas Dual Pressures Disrupt Market Sentiment

The nervousness in yesterday’s market stems directly from the Federal Reserve’s meeting ending in the early morning and the ongoing escalation of Middle East geopolitical tensions. The two resonated, disrupting global liquidity expectations and directly suppressing risk appetite in A-shares.

The first pressure comes from a “sudden shift” in monetary policy expectations.

The Fed’s decision to hold steady as expected was a consensus, but the post-meeting statement and Powell’s remarks cooled the market. The statement explicitly mentioned that Middle East tensions bring uncertainties to the U.S. economy for the first time, and Powell stated that oil price shocks complicate inflation outlooks, even discussing the possibility of future rate hikes—an unusual move.

This stance shifted market focus from “when to cut rates” to “whether rates can be cut at all.” Although the dot plot still hints at one rate cut this year, disagreements among officials have intensified, and implied rate cuts in interest rate futures for the year are less than one. Global liquidity easing expectations have been significantly delayed, directly impacting valuations of growth stocks and market preferences—this is the core logic behind the global capital markets’ collective risk aversion.

The second pressure stems from the “stagflation ghost” triggered by geopolitical conflicts.

The Middle East situation is indeed tense. Early yesterday morning, tensions escalated in the Strait of Hormuz, Qatar’s largest liquefied natural gas (LNG) facility was attacked, and international oil prices surged above $105 per barrel. High oil prices, on one hand, push inflation higher, forcing central banks to maintain tightening; on the other hand, they erode consumer purchasing power and corporate profits. The dual threat of economic stagnation and rising inflation causes funds to instinctively exit and wait on the sidelines.

PART 02

Beyond Panic: Pessimistic Expectations Are Already Priced in the Worst-Case Scenario

When markets decline, anxiety is often amplified. But a calm review shows that current pessimism is more about pricing in “uncertainty” rather than a confirmed crisis.

Looking back at A-shares history, after geopolitical conflicts and overseas policy tightening shocks, markets often recover after short-term sharp declines. Excessive panic can cause investors to miss opportunities.

First, regarding the Fed, hawkish language does not necessarily mean hawkish actions.

This meeting not only did not raise interest rates but also upwardly revised the 2026 GDP growth forecast, depicting a “moderate growth with sticky inflation” outlook. Powell’s remarks are essentially routine central bank flexibility, not a genuine intention to restart rate hikes. The market’s intense reaction seems more like an emotional release after the prolonged expectation of rate cuts was disappointed, rather than rational judgment.

Regarding geopolitical conflicts, the probability of full-scale war is much lower than the game of compromise.

Historical experience shows that both the U.S. and Iran face significant internal constraints—Washington is reluctant to fall into a quagmire of war, and Iran’s economy depends heavily on oil exports. This game resembles a strategic pressure to find a new balance. Any signs of easing in the situation will quickly restore risk appetite that was suppressed yesterday.

PART 03

Returning to A-shares: Mid-term logic remains unchanged, resilience is emerging

Aside from overseas disturbances, the mid-term support for A-shares remains intact.

We are currently in the first year of the 14th Five-Year Plan, with policy efforts continuously releasing positive signals, and the endogenous recovery of the economy becoming clearer. The steady recovery of the real economy is the core confidence supporting the market.

Many investors are concerned about short-term fluctuations but forget that investing is a long-distance race. Over the past decades, A-shares have experienced numerous overseas crises, geopolitical conflicts, and policy cycles. After each panic-driven decline, high-quality assets tend to see valuation recovery. Short-term valuation dips are merely reflections of macro uncertainties and do not change the medium-term trend of economic recovery and policy support.

Yesterday’s market actually provided an answer: no reckless selling, no panic buying, but rather holding the bottom line amid volatility. This is a sign of market maturity and the right investment mindset—not being swayed by short-term news or extreme emotions.

PART 04

Investment Philosophy: Stay Patient, Wait for the Wind

We never just talk about market rises and falls, but also about how to manage anxiety about the future.

There are no smooth sailing markets; volatility is normal, and anxiety is a necessary lesson for investors. We cannot control overseas policies or geopolitical tensions, but we can choose to believe in China’s economic resilience and hold high-quality assets through cycles. Staying patient, observing carefully, avoiding impulsive cuts, and not rushing to buy the dip are the best strategies at this moment.

Remember: stay patient, stay present, and wait for the wind to come.

(Written by: Guojin Securities Wealth Products Center)

Disclaimer: The information published in this column is for investor education purposes only and does not constitute any investment advice. Investors should not replace their independent judgment with this information or make decisions solely based on it. While we strive for accuracy and reliability, we do not guarantee the correctness or completeness of the information and are not responsible for any losses resulting from the use of this information. Investing involves risks; please proceed with caution.