NVIDIA NVDA dropped 10% overnight, and the S&P 500 Index SPX had a deep correction of 5%. Should we cut losses or gradually buy in?

1、NVDA$NVIDIA(NVDA.US) dropped 85 points on Friday, a one-night decline of 10%, ranking first in Wall Street debates.

Some recall Cisco CSCO and Tesla TSLA—will history repeat itself?

I believe it will eventually, but it might be too early at this stage. No stock price rises indefinitely, especially during a broad market correction.

Of course, I’ve previously written about the similarities and differences between CSCO, TSLA, and NVDA in content from Hong Kong brokers. Here, I’ll reiterate the key focus:

Penetration rates in the AI chip industry(How to judge industry penetration? See the end of the articleNasdaq Tech ETF, AI "Era Tickets" in "Chip Breakout"), competitors’ market share, and sustainable performance are the moats for valuation and key metrics for long-term investment.

2、S&P 500 .SPX$MAX S&P 500 4X Leveraged ETN.US corrected deeply by 5%—should we cut losses or double down on U.S. stocks?

Generally, a 1-3% correction in .SPX is normal, while 3-5% is a deep correction. Currently, .SPX has corrected about 5% from its peak. After a ~25% rally since last October, this pullback is expected.

Investing in .SPX involves many factors: the delicate balance between fiscal and monetary policies, sustained consumer market strength, challenges in real estate, manufacturing revival, labor market complexities, and sticky inflation. I’ll detail the investment logic in a dedicated article—stay tuned and star the 公众号。

Here’s my take:

1) Macro perspective:

Current models suggest a soft landing or no landing. Biden’s push for manufacturing reshoring, accelerated destocking, delayed rate cuts, and a potential restocking cycle in H2(possibly syncing with China) could improve corporate earnings.

Delayed cuts—will U.S. debt default? High rates strain debt, but the U.S. will extend rather than default(politically, backed by carrier fleets and hegemony).

Could prolonged high rates trigger a hard landing?

Unlikely. Indicators like the Phillips curve, non-farm payrolls, inflation, wages, and unemployment suggest a <15% recession qualifies as a soft landing. Before a hard landing, the economy must first soft-land—current trends hint at recovery, evidenced by inventory cycles and PMI.

What if a hard landing happens?

A hard landing would prompt aggressive Fed cuts. By then, .SPX may have fallen ~20%, while Treasuries rally. Thus, bonds outperform stocks in hard landings—but stocks win in soft/no-landing scenarios.

Biden’s re-election hinges on two tasks: taming inflation and boosting stocks.

I predict a hawkish H2 FOMC to curb inflation, but CPI may not hit 2%. Instead, reshoring risks "re-inflation," with year-end CPI possibly hitting 4%.

(Aside: Gold or oil in 2024? I favor gold, as concluded last yearGold ETF, 2024’s Big Beta. Oil’s 2024 prospects dim amid inflation control and recession-to-recovery shifts—2025 is its yearSouthern Crude Oil LOF, Commodity QDII-FOF-LOF). Macro assets require long-term holds.)

H2 voter confidence hinges on stock gains—no profits mean lower Biden support. Election years typically buoy markets.

Conclusion: Fundamentals and politics both signal a (bullish) .SPX trajectory for 2024.

(Reminder: Avoid political bias. Capital is bloodthirsty—no one funds corrupt execs or insider-trading fund managers under the guise of patriotism. Profits converted to RMB boost domestic demand—that’s real patriotism.)

2) Stock valuations

① Macro improvements may lift average earnings ~3%, but sustained 5-8% growth is needed for market strength—a question of widespread earnings beats.

② Valuation denominators depend on 10Y Treasuries. Hawkish Fed lifts yields (bearish), but a dovish H2 pivot could reverse this.

3) Geopolitics

Geopolitical impacts are transient—see Russia-Ukraine’s fading market influence. Israel-Iran tensions won’t spark WW3 given power disparities.

3、Reject retail’s“Ye Gong loves dragons syndrome”—no one knows exact market bottoms. Avoid these common retail mistakes:

① Regretting missing rallies.

② Waiting endlessly for pullbacks during new highs.

③ Fearing deeper drops during corrections.

④ Obsessing over perfect bottoms, missing rebounds.

⑤ Repeating the cycle, never entering as markets rise.

Finally, invest long-term (daily charts), scaling into tech leaders, "pancakes," weight-loss drugs, and inflation plays. Preserve cash, manage risk, and remember: "Survivors win."