What’s next? Break the leek mentality and build a three-layer defensive and offensive system for the slow bull market era!

Hello, fellow investors, happy weekend. The market is closed today, but our thinking cannot stop. In the past week, the market has experienced violent fluctuations from panic selling to a strong rebound, with the Shanghai Composite Index weekly chart showing a “golden needle bottom.” Many friends are asking: Is the bull market still on? How should we play next? [Taoguba]

Combining recent information from authoritative platforms like East Money, Securities Times, China Securities Journal, Tencent News, as well as extensive data from deep communities like Zhihu and Xueqiu, I have distilled this enlightening core insight for everyone. The market tone for A-shares in 2026 has fundamentally changed; if you still use last year’s thinking, you may earn the index but lose money.

1. The trend is set: from “valuation frenzy” to “profit scrutiny”

Nearly all mainstream institutions have a highly consistent core judgment: In 2026, A-shares will formally transition from a purely valuation repair market to a “slow bull” phase driven by corporate profits.

Logic shift: In the past two years, the market’s rise has mainly relied on liquidity easing and policy expectations to pull valuations. However, historically, pure valuation expansion trends have never lasted more than three years. In 2026, the space for valuation expansion is very limited, and whether corporate profits can be realized will become the core “deciding factor” for stock price trends.

Data support: In the first two months, profits of industrial enterprises above designated size nationwide grew by 15.2% year-on-year, and the macro data recovery has provided a foundation for profit repair. Multiple institutions predict that the profit growth rate for the entire A-share market in 2026 will show a “low in the front and high in the back” trend.

Characteristics of a slow bull: This means that the index may not soar as it did in the past, but volatility will decrease, and the market will be more stable and sustainable. “Low volatility slow bull” will be the main melody for the whole year.

2. Core main lines: Three directions, each essential

Market style will shift from the “one-man show” of technology growth in 2025 to a balanced pattern where “technology, cycles, and value” coexist. Investment must closely adhere to three main lines:

1. Technology growth spear: AI-driven new productive forces (offensive positions)

This is the direction with the most certainty in policy and the strongest industrial trend. However, the focus has shifted from infrastructure construction periods to “commercialization” and “performance realization.”

Computing power and semiconductors: Optical modules, advanced packaging, and domestic substitution of semiconductor equipment. High capital expenditure on AI in North America resonates with breakthroughs in domestic computing power.

AI applications and endpoints: 2026 is the “year of AI terminal innovation,” focusing on breakthroughs from concepts to mass production in intelligent driving, AI software, and humanoid robots.

Future industries: The low-altitude economy, commercial space, quantum technology, etc., have entered a phase of intensive policy implementation and initial industrialization.

2. Economic recovery shield: Profit recovery under anti-involution (balanced positions)

“Anti-involution” policies are reshaping the supply-demand landscape in multiple industries, bringing about certain opportunities for price recovery and profit improvement.

Resource products (price increase logic): Driven by geopolitical conflicts and the global manufacturing recovery, the supply-demand for oil, coal, and industrial metals (copper, aluminum) is tightening.

Chemicals and midstream manufacturing: The industry structure is optimizing, leading companies are increasing their capacity utilization rates, and combined with rising product prices, profit elasticity is relatively large.

New energy turning point: Supply-side clearance and demand-side driven by AI computing power synergy show signs of a turning point in the industry fundamentals.

3. High dividend value anchor: HALO assets (defensive base)

In an uncertain environment, high dividend assets are the ballast. The concept of “Chinese-style value investment” and “HALO assets” (heavy assets, low elimination rates) proposed by Yang Delong from Qianhai Kaiyuan Fund is worth noting.

High dividend state-owned enterprises: Sectors like banking, insurance, electricity, and transportation have stable cash flows and high dividend rates, making them particularly attractive against a backdrop of declining interest rates.

Dividend assets: Provide stable cash flow returns, suitable for long-term holding as a base to cope with market fluctuations.

3. Current market: Golden pit and high-low switching under geopolitical disturbances

The V-shaped reversal of the market last week has released key signals:

Emotional bottom emerging: The “pattern support” in the 3780-3850 point range of the Shanghai Composite Index has withstood the test, panic selling has been cleared, and main funds have flowed against the trend. The characteristics of “low volume meet low price” are quite obvious.

High-low switching in progress: The leading sectors on Friday, innovative drugs (overseas BD data exceeded expectations) and lithium batteries (price rebound, export concerns eased), are both sectors that have undergone sufficient prior adjustments and show marginal improvements in fundamentals. Meanwhile, continuously strong sectors like coal and electricity are experiencing corrections. This clearly indicates the movement of funds from high positions to low positions.

External variables: The situation in the Strait of Hormuz remains a key short-term emotional disturbance, but market sensitivity to it is decreasing. The “self-reliant” internal logic of A-shares is fundamental.

4. Survival rules for 2026: A few pieces of advice for investors

5. Absolutely do not chase highs: Senior market figures like Li Daxiao repeatedly emphasize that this is the first survival rule in a high-level fluctuating market. For short-term surges in hotspots, remain more level-headed.

6. Stick to a barbell-type allocation: This is the best strategy to adapt to “slow bulls” and “structural markets.” Hold high dividend and dividend-paying assets as ballast on one end, and on the other end, hold quality growth stocks that have adjusted sufficiently to capture elasticity, with cyclical recovery sectors in between.

7. Shift from “listening to stories” to “looking at financial statements”: Peking University Professor Tian Xuan pointed out that the market driving logic has shifted to profit verification. This year, the quality of earnings reports will directly determine the stock price fate of individual stocks. Be sure to pay attention to the company’s cash flow, gross margin, and order visibility.

8. Maintain position flexibility: The market has not formed a one-sided trend, and during the consolidation phase, avoid full-position operations. Retain some cash to seize the “golden pit” of desired targets during pullbacks.

9. Ignore noise and focus on industries: Geopolitical issues and short-term news disturbances abound, but what determines the long-term direction of A-shares is still the domestic industrial upgrade (new productive forces) and the process of economic recovery. Hold firmly to the main lines and do not let the market’s daily fluctuations lead you astray.

Conclusion:

A-shares in 2026 will be a comprehensive test of investors’ cognition, patience, and discipline. The era of easy gains from broad market rallies is over; the time for deep industry engagement, meticulous stock research, and balanced allocation is arriving. The “pits” created by panic in the market may serve as the starting point for substantial future returns for those who are prepared.

This weekend, take a moment to calmly reassess your holdings to see if they align with the new logic of “profit-driven” and “structural slow bull.”

Wishing everyone successful investments, see you next week!
$Rongjie Shares (sz002192)$ $Jin Control Power (sz000767)$ $Mino Hua (sh603538)$ $Shennan Electric (sz000037)$ $Yuneng Holdings (sz001896)$