4000 points breached, upside gap also filled - Is the A-share bull market still intact?

Ask AI · How does government leverage provide macro backing for the A-share bull market?

A-shares lose the 4,000-point mark, with the gap successfully filled, and market sentiment sharply cools down. At this juncture, investors’ most pressing question is: Is the nearly two-year-long bull market still ongoing?

First, it must be clear that 4,000 points has never been a dividing line between bull and bear markets. Starting from 2,689 points, the market surged triumphantly to 4,000, demonstrating strong momentum; however, breaking below 4,000, or even filling the gap from earlier in the year, these technical features alone do not signal the end of a bull market. Historically, there have been two instances where the index stabilized above 4,000 and then continued for over 20 days before turning into a bear market, but simplistic comparisons like “marking the boat to seek the sword” overlook the fundamentally different macroeconomic backgrounds and policy logic behind each cycle. The continuation of a bull market cannot be judged solely by the gain or loss of a certain integer level.

Assessing the quality of a bull market requires returning to more fundamental conditions. Are liquidity conditions ample? Is the corporate profit cycle upward? Are market valuations attractive? Has there been a structural shift in household asset allocation? And is the macro policy environment forming a synergistic force? These are the true “ballast.” From these perspectives, the core logic supporting this round of bull market remains intact and even strengthening. The most critical factor is the clear path of government leverage — the arrangement of 11.89 trillion yuan in government debt is the strongest macro backing for this rally. In the context of weak private sector demand and constrained credit expansion, the government, as the last borrower, injects momentum into the economy through fiscal expansion, providing the market with certain asset supply. This fundamental logic is far more solid than short-term technical patterns.

Drastic external changes are indeed the biggest variable facing the market now. The ongoing escalation in the Middle East, if conflicts persist, will transmit impacts through multiple channels to A-shares.

The first is crude oil prices — if geopolitical risks push oil prices higher, it will directly raise manufacturing and transportation costs globally, creating imported inflation pressure. This not only compresses profit margins for downstream companies but may also force the Federal Reserve to maintain a hawkish stance on rate cuts, thereby exerting continuous pressure on capital flows to emerging markets. Domestically, demand remains weak, and a comprehensive improvement in fundamentals will take time and policy efforts. When external cost shocks combine with internal demand weakness, the market’s adjustment pressure cannot be ignored. However, it’s important to distinguish that these factors mainly influence the market’s rhythm and structure, not the overall trend reversal. External shocks cause short-term sentiment and capital disturbances, while domestic fundamental weakness is a medium- to long-term structural issue. Yet, because the fundamentals have not yet formed a strong resonance, the policy’s “bottom support” is even more worth期待。

Next, the market will enter a critical validation period, focusing on several aspects:

First, the effectiveness of breaking below 4,000 points needs confirmation — whether it’s a brief breach followed by quick recovery, or an effective suppression, which will directly determine the evolution of technical patterns;

Second, policy responses are crucial — in the context of key index levels being breached and market sentiment rapidly freezing, whether there will be measures to stabilize expectations, and the pace and力度 of policies will directly impact confidence recovery;

Third, capital behavior is the most direct window into the market. Will northbound funds show signs of returning after continuous adjustments? Can the margin financing balance stabilize after rapid contraction? And what is the willingness of domestic institutions to allocate at low levels? These factors often reveal more than the index itself.

Meanwhile, ongoing external risks must be closely monitored — the trajectory of Middle East conflicts, oil price turning points, and Fed statements will all be key variables influencing market direction.

For investors in different situations, current choices are clearly different:

1. Investors gradually reducing positions above 4,000 points and protecting profits can be more relaxed now: the market’s rapid adjustment is digesting risks, and new allocation opportunities are approaching. Patience is needed to wait for stabilization signals and clearer structural directions;

2. Those still holding heavy positions above 4,000 points, or even recently increasing their holdings significantly, should avoid panic selling. Even if the bull market ends, the top often presents complex patterns. Technical repairs after sharp declines are almost inevitable. When that happens, adjusting or reducing positions based on rebound strength is more rational than passive stop-loss at the lowest emotional point.

Returning to the initial question: Is the bull market still here?

If a bull market simply means the index rising endlessly in a one-sided manner, then any correction might shake that belief. But if the essence of a bull market is driven by macro policy shifts, the restart of credit cycles, and shifts in household asset allocation, then the current intense volatility is more like a high-intensity stress test of the trend.

History does not repeat itself simply, but every meaningful bull market has moments of doubt about its end. The only thing to watch out for is the potential ongoing disturbance caused by external conflicts and high oil prices — they won’t easily change the overall trend direction but can make the path more tortuous and complex.

Author’s note: Personal opinions only, for reference.