In the five trading days before the holiday, A-shares outperformed all others, even briefly breaking through the 3,500 point mark. However, on the second day after the holiday's opening, A-shares experienced their first correction since the surge, with the Shanghai Composite Index falling by 6.62%, and the ChiNext Index dropping by 10.59%. This is not friendly to investors who have just entered the market; where should this market trend go from here?

There are three main reasons behind the significant correction in A-shares this time.

Firstly, the market has been rising too sharply recently, with excessive gains and rapid increases, accumulating a considerable amount of profit-taking positions. After a major market trend, a sharp decline can effectively digest the profit-taking chips.

Secondly, on the evening of October 8th, there was a significant drop in Chinese assets abroad, and on the domestic front, a batch of listed companies also saw a wave of share reductions, which affected market sentiment.

Thirdly, on the 9th, the People's Bank of China conducted a 61 billion yuan 7-day reverse repo operation with a winning interest rate of 1.50%, while there were 196.5 billion yuan in reverse repos maturing, leading to a reduction in market funds.

Through these dimensions, one can analyze the current position of A-shares and thus speculate where the market is likely to go in the future.

Looking at historical valuations vertically, represented by the CSI 300 Index for the A-share market, the current price-to-earnings (P/E) ratio is 17.89 times, with a ten-year historical percentile of 54.46%, which can be simply understood as being in a moderately high position over the past decade:

The current price-to-book (P/B) ratio of the CSI 300 Index is approximately 1.54, which is at a lower position over the past decade:

The high P/E ratio and low P/B ratio are due to the slowdown in economic growth and the decline in the profitability of listed companies. If the economy recovers in the future and corporate profitability improves, the P/E ratio will also correspondingly fall, so the current market valuation is not considered high.

Comparing with foreign markets horizontally, when comparing the P/E ratios of the leading indices of the stock markets in the United States, Japan, Europe, and India, the current P/E ratio of the CSI 300 Index is 13.03 times, which is relatively low and is the lowest valued index among the main stock markets globally.Comparing the investment value of stocks and bonds. Typically, the earnings yield of a stock market (the reciprocal of the price-to-earnings ratio) is used to represent the long-term return expectation of the stock market, and it is compared with the yield to maturity of a ten-year government bond.

The ratio of the earnings yield of the CSI All-Share Index to the yield to maturity of a ten-year government bond is currently 2.25 times, which is still a relatively high level over the past decade.

In summary, by comparing both historical and market data, and by comparing the earnings yields of stocks and bonds, it can be observed that the current valuation of A-shares is not high, and there is no bubble due to a few days of sharp increases.

This bull market is more driven by emotional surges under policy stimulus, and the short-term market depends on market sentiment and liquidity. In terms of liquidity, the central bank has continued to lower reserve requirements and interest rates, with M2 currently exceeding 305 trillion. Additionally, the financial reports of various listed companies in the third quarter will also become a short-term stimulus factor.

Investors are often affected by short-term fluctuations in their emotions. Rapid increases can easily trigger a trend of following the market, while sudden adjustments can plunge investors into panic, leading to irrational investment behavior. Alipay's investment advice suggests that the best approach for investors at this time is to use intelligent fixed investment to smooth out fluctuations. For example, Alipay's intelligent signal feature can determine the share of fixed investment based on the value of stocks and bonds, minimizing the discomfort caused by fluctuations.

For those investors who have just entered the market, there is no need to worry too much about short-term declines. There are opportunities to make money in fluctuations. Long-term money is easier to earn than short-term money. Trend money is easier to earn than individual stock money. Even in a market that performs well, individual stocks will also show divergent trends. By investing in indices or portfolio investments instead of betting on individual stocks, the chances of winning are higher. Alipay's Smart Index and selected stock fund strategies are good choices. The Smart Index strategy focuses on sectors such as finance and technology that have performed well recently, achieving significant excess returns.

Finally, maintaining a good attitude is crucial. Market fluctuations and rotations are the norm. If investors can make good use of fixed investment and profit-taking tools, and balance their allocations, they can better diversify risks and reduce fluctuations.