The cause of the sharp market decline has been identified!

Secondly, to rescue the yen, Japan injected over ten trillion yen into the foreign exchange market in July and August—where did this money come from? The market widely speculates it came from selling U.S. Treasury bonds. Funds are selling off U.S. Treasuries, signaling rising global liquidity risk. Liquidity, put simply, refers to how much money in the market is still willing to take risks. Now even U.S. Treasuries are falling—this indicates that risk-taking capital is already scarce. This is also why U.S. equities have recently declined. Moreover, the 10-year U.S. Treasury yield carries another nickname: the ‘global asset pricing anchor.’ Whether stocks or real estate, virtually all global assets are priced relative to it. Right now, this anchor has risen to 4.8%. What does that mean? You can lend money to the U.S. government risk-free and earn 4.8% annually. Meanwhile, many equity markets trade at P/E ratios above 20x, delivering annual returns of only around 3%. Once compared, capital naturally flows out of equities. And the 30-year yield has surged even more sharply than the 10-year yield. What does ‘30-year’ signify? Sellers are effectively recalculating their outlook for the next three decades. Large-scale selling of U.S. Treasuries signals that global capital is becoming both costlier and scarcer—liquidity risk is indeed escalating. When money tightens, every corner feels the drought; A-shares are unlikely to remain immune. This is the broad backdrop behind today’s plunge—over 4,000 stocks falling. Rising U.S. Treasury yields actually suppress gold prices. Moreover, after a hawkish speech by the Fed Chair and surging rate-hike expectations in September, markets now price a nearly 70% probability of a September rate hike. Once a rate hike materializes, dollar-denominated interest rates rise further. Gold, being a non-yielding asset—offering no interest income—gets pressured whenever rate hikes loom. Gold’s recent break below $4,400 reflects precisely this anticipatory pressure. But this is pressure from expectations—not a breakdown in gold’s fundamental logic. Once the ‘shoe drops’—i.e., once the hike is fully priced in and implemented—the negative catalyst dissipates, and the weight lifted from gold will likely trigger a rebound. Because the U.S. keeps printing more dollars, while gold supply remains essentially fixed—gold prices will inevitably rise with the tide. Unless the U.S. stops printing and starts repaying debt instead. But expecting a serial defaulter to repay? That’s about as likely as the sun rising in the west. So don’t get overly euphoric in good times—and don’t despair excessively in bad ones. Volatility—ups and downs—is entirely normal. In broad-based selloffs, high-quality companies inevitably get caught in the crossfire. What do we mean by ‘caught in the crossfire’? It means the company itself remains sound, its fundamentals improving, yet its stock price plunges alongside the broader market. The chemical industry is the most typical example: profits across the sector have rebounded this year—making it a key focus of our research and investment efforts.

Why are stock prices plummeting despite listed companies reporting profit growth?

Earnings reports are earnings reports; stock prices are stock prices. If you want to study the relationship between them, consider turning your attention to U.S. equities—there, markets tend to be relatively rational and the scale is larger. Currently, A-share markets frequently misprice assets—making them better suited for speculation than for fundamental investing. When an industry is thriving and company earnings are strong—but its stock price falls into the undervalued ‘left-side’ zone—the market is wrong. In such cases, you can adopt a ‘left-side’ strategy: buy more aggressively as prices fall, scaling up purchases on deeper declines. Conversely, when an industry is thriving and earnings are strong—and the stock price rises into the ‘right-side’ momentum zone—the market is right. Then, follow a ‘right-side’ strategy and buy on strength.

Oil-Dri Corporation Stock Falls 4.7% Despite Record Earnings

5 days ago

Oil-Dri Corporation stock fell 4.7% to $80.43 despite record annual results featuring Q4 EPS of $1.00 and revenue of $129.29 million. Analysts maintain a Buy consensus while declaring a quarterly dividend of $0.225 per share.

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