Yang Delong: Owning high-quality equity is the primary channel to achieve a leap in personal wealth

Yang Delong: Owning high-quality equity is the primary channel for achieving a leap in personal wealth

On Friday, April 9,

The two markets experienced a pullback again,

Overall this week, the A-share market showed a volatile trend,

This marks the end of the previous one-sided decline,

Entering a phase of stabilization and bottoming out,

Looking for opportunities to rebound,

Of course, the rebound process has been bumpy,

Because it takes time for investor confidence to recover.

The recent wave of correction after the holiday was mainly due to market reasons,

Not changes in fundamentals,

In fact, China’s economic recovery strength remains robust,

While the US economic recovery exceeded expectations,

The IMF recently announced that,

Global economic growth in 2021,

has been significantly upgraded,

which also means that after the initial control of the pandemic,

GDP will experience a rapid rebound,

The dual drivers of this rebound are the economic recovery in the US and China,

The US launched a $1.9 trillion economic stimulus plan,

which to some extent boosted investors’ expectations for future economic recovery,

And China started its recovery process as early as April last year,

and achieved positive growth in 2020,

being the only major economy to do so,

So, the IMF’s upward revision of global economic growth expectations is good news for global stock markets,

Due to the low base effect,

2021 is expected to see the highest global economic growth rate in 40 years.

Currently, US stocks are still at new highs,

and there is no sign of the bubble burst many investors worried about before,

In fact, I have always emphasized that the valuation bubble of US stocks,

should now be viewed more optimistically,

which is that after the US fiscal policy was introduced, it might boost economic growth,

to some extent solidifying this bubble,

rather than causing it to burst quickly,

Sometimes, after a bubble forms,

it can last for a long time,

Many people previously worried that a bubble burst in the US might drag down the A-share market,

but in fact, US stocks have been hitting new highs recently,

The Dow Jones Industrial Average even reached above 33,600 points.

It keeps setting new records,

which shows that global investors still have strong confidence in the US,

So, we don’t need to pay too much attention to the US stock performance,

Overnight, US stocks continued to rise,

showing a relatively strong trend,

and the S&P 500 hit a new all-time high,

Large tech stocks generally rose.

Federal Reserve Chairman Powell warned that,

mutations of the coronavirus and uneven progress in global vaccination could threaten economic recovery,

which also means the Fed is unlikely to tighten monetary policy in the short term,

Powell said the central bank hopes to see concrete evidence of strong economic growth before considering changing its accommodative monetary stance,

He reiterated that the inflation increase this year is expected to be temporary,

In fact, globally,

central banks continue to maintain loose monetary policies to support their economies,

making the probability of asset prices continuing to rise very high in the future,

Although asset prices have already surged significantly,

these major central banks, represented by the Fed, are not considering tightening,

so asset prices are expected to further increase.

The March monetary policy statement from the Fed reaffirmed,

that it will keep the current monthly $120 billion QE bond purchases until substantial further progress is made toward the Fed’s inflation and employment goals.

“Substantial further progress” means real progress,

hoping to see real progress before tapering QE,

so future monetary policy remains accommodative,

which has contributed to the rise in global asset prices.

Looking at the US,

the events of the past two years provide some insights.

The pandemic has had a huge impact on US society,

and has caused significant wealth restructuring,

further exacerbating income inequality in the US,

Since wealthy people own stocks,

especially shares of good companies,

after the Fed’s liquidity injections,

the stock market kept hitting new highs,

and the wealth of these wealthy individuals increased significantly,

While the poor, who do not own stocks or funds,

and with rising unemployment caused by the pandemic,

many have lost their jobs,

the poor have become poorer,

and many middle-class people, lacking stock holdings, have fallen into poverty,

It can be said that whether one owns shares of good companies has become a key factor in wealth disparity,

This is very instructive for us.

The latest Forbes list has been officially released,

with 2,755 billionaires on the list,

total wealth reaching $13.1 trillion,

an increase of $800 billion year-on-year,

thanks to the global central banks’ liquidity injections driving asset prices higher,

and the wealth of these stock-owning billionaires has risen accordingly,

including the richest person Bezos,

with a net worth of $177 billion,

a billionaire among nations.

Tesla founder Elon Musk,

saw his ranking soar,

thanks to Tesla’s 8-fold increase last year,

with a net worth of $151 billion,

second only to Bezos,

becoming the world’s second-richest person.

Similarly, Louis Vuitton founder Arnault,

with a net worth of $150 billion,

ranked third,

followed by Bill Gates,

with a net worth of $124 billion,

and Mark Zuckerberg,

with $97 billion,

Warren Buffett ranked sixth,

which is the first time since 1993 that he hasn’t been in the top 5.

However, Buffett’s net worth of $96 billion is still $28.5 billion higher than in 2020.

What are your thoughts after seeing this? The key point is that owning high-quality equity,

is the most important channel for achieving a leap in personal wealth.

If relying solely on salary income,

it cannot keep pace with currency devaluation,

meaning real wealth is shrinking.

I believe the next 10 years will be the golden decade for the A-share market,

which is actually the golden decade for high-quality companies.

I compare it to a K-shaped trend,

where the vertical line represents the golden 10 years of A-shares,

and the upward line of the K symbolizes the continuous rise of high-quality stocks,

while the downward line indicates the decline of underperforming or speculative stocks,

with a very clear divergence.

In fact, the K-shaped trend is normal worldwide.

For example, the Nasdaq index in the US has increased sixfold over the past few years,

but only about 10% of stocks have surged significantly,

while 70% of stocks have seen no increase.

This again proves that in US stocks, the divergence is not 28-fold,

but 19-fold.

Because capital increasingly favors well-performing companies with good stock ownership,

which is a characteristic of global capital markets,

not unique to the A-share market.

In fact, compared to US stocks,

the A-share market is still relatively balanced.

We should correctly view these good assets represented by high-quality stocks,

and the fact that they are favored by funds is inevitable.

The purpose of the capital market is resource optimization and allocation,

and funds flowing into good companies provide capital support,

creating more opportunities,

while poor companies are automatically eliminated by the market,

only such a market can sustain healthy competition and selection.

For individuals,

if we want to realize wealth appreciation,

we should embrace high-quality stocks or funds,

and continuously grow our wealth.

Relying on salary income,

or investing in poor products or companies,

is like the downward line of the K-shaped trend,

and will keep declining,

which is a big lesson for us.

Therefore, whether for individual investors or institutional investors, seizing good assets,

holding high-quality equity or funds,

is the most important way to achieve continuous wealth growth.

The K-shaped pattern vividly illustrates the investment opportunities and divergence in the A-share market over the next 10 years,

hoping to inspire everyone.