Pessimism is a form of foresight,while optimism requires wisdom
16 Jul 2023
In the recently concluded first half of 2023, the global economy and financial markets witnessed a range of emotional disturbances. In the United States, the surge in the S&P 500 index during this period was driven by confidence in AI technology prospects and a robust labor market. Conversely, China faced weak consumer spending due to a lack of consumer confidence, resulting in a drag on the Chinese economy. Additionally, the contraction of the global market and the shifting of industrial chains adversely affected exports, leading to an economic recovery that fell short of expectations. Amidst the current market performance, characterized by a sense of polarization, there have been extreme voices advocating for the withdrawal of investments from China and Hong Kong, suggesting that the United States is the optimal choice. This view proposes that all investments should be concentrated in the US market, both in the short and long term, based on the economic trends observed in the first half of the year. However, this approach contradicts the fundamental principle of investment, which emphasizes diversification. Macroeconomic conditions are inherently uncertain, and while it is important to consider short-term economic trends, we must not overlook the significance of long-term risk diversification.
As this reflection serves as a causal analysis, I will briefly examine recent events in China and the US over the past two weeks, aiming to provide evidence for looking beyond surface-level observations and understanding the essence. This analysis can further serve as a valuable reference for asset allocation decisions for us as investors in the second half of the year.