"The lowest point of the A-share index may have already passed," this judgment comes from two "axioms," and some market observations are illustrating that these two "axioms" have occurred.

1.

Axiom One: Low volume indicates low prices.

At the level of securities trading, the low point of stock turnover often coincides with the low point of stock prices.

Some arguments point to the lowest turnover rate of A-shares having already passed, in other words, the low point of stock prices has already passed.

1.1 The turnover rate of A-shares has already fallen to the level of the fourth quarter of 2018, a typical low point of a bear market.

The recent low point of the total A-share transaction amount is about 480 billion yuan, and the turnover rate (total A-share transaction amount/free float market value) is about 1.5%.

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In the fourth quarter of 2018, both stocks and bonds were hit, and the low point of the turnover rate was about 1.1%, with the average low point of the turnover rate (30-day moving average) around 1.5%.

In this way, the current turnover rate is close to the 2018 low point, which should be considered as having experienced a low volume.

1.2 The trend of credit spreads in the bond market can corroborate that the turnover rate of A-shares has passed the lowest point.

We observe that there is a correlation between the low points of bond credit spreads and the low points of stock turnover rates.

Generally speaking, the turnover rate of the stock market will enter the low point before or after the bond credit spread bottoms out.

When a large amount of funds shift from stocks to bonds, the credit bond trading will be very crowded, and the credit spread will continue to be compressed.

When the credit spread narrows to the extreme, it also means that the liquidity of the stock market has entered a low point.

If the credit spread begins to widen, the transaction volume of the stock market will also increase, such as in May 2020 and October 2022.

Looking at the current credit spread, the liquidity spread has widened, and the grade spread has narrowed to an historical extreme, indicating that the bond credit spread has widened, and a large amount of funds are no longer piling up in bonds, and the stock market transaction volume may slowly increase.

2.

Axiom Two: Stock prices lead earnings.

The securities market prices stocks based on expectations, and the low point of stock prices often leads the low point of corporate earnings.

If we are experiencing the lowest point of corporate earnings, then the low point of stock prices may have already passed.

2.1 The year-over-year growth rate of the revenue of listed companies in the second quarter of 2024 (all A-shares/excluding financials, oil, and petrochemicals) has created the fourth lowest point in the past two decades.

Generally speaking, the continuous decline in revenue (i.e., the continuous negative year-over-year growth rate of revenue) does not exceed three quarters in the history of A-shares.

2.2 The low point of the stock index generally appears before the lowest point of corporate revenue growth rate.

2.3 There is no significant relationship between the low point of corporate revenue growth rate and GDP growth rate.

The actual GDP growth rate corresponding to the low point of the year-over-year growth rate of all A-share revenue (2009Q1, 2015Q3, 2020Q1) is positive 6.4% (2009Q1), 7.0% (2015Q3), and negative 6.9% (2020Q1).

Therefore, investors can appropriately pay less attention to the so-called macro indicators.

We boldly speculate that the year-over-year growth rate of the revenue of listed companies in the third quarter of 2024 may be the lowest point of this cycle, and it may still be negative.

However, from the fourth quarter of 2024, the year-over-year growth rate of revenue begins to rise.

In other words, we are now experiencing the lowest point of corporate earnings, and the low point of stock prices has already passed.

Risk warning: The past does not represent the future; third-party data statistics errors; policy stimulus beyond expectations.