Professional Investors' Perspective: Mastering Core Techniques in the U.S. Stock Market

In today’s U.S. stock market, investors face not only the volatility of stock prices but also an overwhelming amount of information. For ordinary investors, making wise investment decisions in such a complex and variable environment has become a crucial topic. Professional stock investors, through years of market experience and in-depth analysis methods, have a profound insight into the market, thus forming some effective U.S. stock investment methods. Let’s discuss these methods.

Stock investment analysis mainly falls into two categories: technical analysis and fundamental analysis. Technical analysis relies on historical data such as stock prices and trading volumes, using charts and various technical indicators to predict the future trend of stocks. On the other hand, fundamental analysis evaluates the intrinsic value of stocks based on the company’s financial health, industry position, market environment, and macroeconomic conditions.

These two methods have their focuses: technical analysis is quick and intuitive, suitable for short-term trading; fundamental analysis is thorough and comprehensive, suitable for medium and long-term investments. However, as market conditions continue to change and investment tools become more complex, relying solely on one method is no longer sufficient for efficient investing. Therefore, professional investors often combine these two methods to gain a more comprehensive market analysis perspective.

In this article, we will delve into the specific applications of these two analysis methods and demonstrate, through examples, how to combine them to formulate a scientific investment strategy. We will start by discussing the limitations of technical analysis, exploring why relying solely on technical analysis may lead to misjudgments about the market, and analyze how fundamental analysis can help investors understand market dynamics more comprehensively.

Limitations of Technical Analysis

Technical analysis is a common method in the U.S. stock market, relying on price trend charts and various technical indicators like moving averages, MACD, RSI, etc., to predict future stock price movements. Proponents of technical analysis believe that “history repeats itself,” and by identifying patterns and trends, investors can seize the right moments to buy or sell. For instance, the often-mentioned “double top” pattern is a typical bearish signal, indicating that prices might fall.

However, the effectiveness of technical analysis has been questioned in the modern U.S. stock market. Firstly, market efficiency implies that all known information is already reflected in stock prices, and technical patterns often represent only the randomness of the market, not reliable indicators of future trends. Additionally, technical analysis cannot account for price fluctuations caused by fundamental changes, such as company earnings releases, significant news events, or changes in macroeconomic policies.

Another major limitation of technical analysis is its subjectivity. Different analysts may interpret the same pattern differently. With the rise of algorithmic trading in modern markets, many technical analysis patterns are recognized and reacted to quickly by algorithms, making it difficult for individual investors to profit against these automated, large-capital maneuvers. For example, quantitative hedge funds use complex mathematical models and machine learning technologies to predict stock prices, operating at speeds and efficiencies far beyond the average investor.

More importantly, over-reliance on technical analysis may lead investors to overlook the fundamental aspects of companies. As mentioned in the text, some technical signals may form due to market psychology, but this does not represent the real value or long-term growth potential of the companies. Ultimately, stock prices are still influenced by multiple factors such as a company’s profitability, industry standing, and the macroeconomic environment.

Therefore, to develop a more robust investment strategy, professional investors usually combine technical analysis with fundamental analysis. Next, we will explore the core elements of fundamental analysis in detail, and how through in-depth fundamental research, potential investment opportunities can be identified and assessed.

Deep Dive into Fundamental Analysis

Fundamental analysis evaluates the true value of a company, involving an in-depth analysis of the company’s financial data, industry position, market environment, and macroeconomic conditions. Unlike technical analysis, fundamental analysis offers a more comprehensive and long-term investment perspective.

Macroeconomic Analysis

Fundamental analysis starts at the macro level. Macroeconomic conditions like GDP growth rates, unemployment rates, monetary policies, and national policies have profound impacts on the U.S. stock market. For example, the effect of quantitative easing policies on the U.S. stock market: Quantitative easing, by increasing the money supply and reducing borrowing costs, generally leads to a rise in the stock market. Thus, understanding these macroeconomic indicators is crucial for predicting overall market trends.

Industry Analysis

Next is the analysis at the industry level. Each industry has its specific growth cycles, technological innovations, regulatory environments, and market demands. Investors need to assess the life cycle of the industry to determine whether it is in a growth, maturity, or decline phase. For instance, the technology industry, due to continuous innovation and demand growth, may exhibit a different growth pattern from traditional manufacturing industries.

Company Analysis

The core analysis involves individual companies. This includes a detailed study of company financial statements, such as income statements, balance sheets, and cash flow statements. Investors need to evaluate a company’s profitability, debt levels, cash flow status, and capital structure. Additionally, consideration should be given to the company’s market share, competitive position, management team capabilities, and strategic direction.

By integrating analysis at these three levels, investors can more comprehensively understand the intrinsic value of stocks. Compared to technical analysis, fundamental analysis provides a deeper understanding, helping investors judge whether a stock is overvalued or undervalued by the market.

Combining Macro and Micro Perspectives in Investment Strategy

After understanding the importance of fundamental analysis, a comprehensive investment strategy should combine insights from both macroeconomic and company levels. This strategy not only reflects the broader market environment but also zeroes in on the details of investment targets, providing investors with a multi-angle decision-making framework.

Integrating Macroeconomic Data

Macroeconomic data provide the broad background in which the market operates, affecting all industries and companies. For example, when the central bank announces a more relaxed monetary policy, it usually drives capital market gains, as a low-interest-rate environment reduces investment costs and stimulates economic activity. In this context, the U.S. stock market typically reacts positively. Therefore, when making investment decisions, investors need to monitor these macro indicators, such as interest rates, inflation rates, employment data, etc., to predict their possible impacts on the market.

Detailed Company Analysis

Under favorable macro conditions, investors should further analyze individual companies to determine their investment potential under current market conditions. This includes analyzing a company’s profitability, debt situation, cash flow, management quality, and market competitive position. For example, a company that shows strong revenue growth and robust financial management during an economic expansion might be an attractive investment option. Conversely, if a company performs poorly even during periods of economic improvement, that could be a potential risk signal.

Strategy Implementation

When implementing such an investment strategy, investors should establish clear rules for entry and exit. For example, one might decide to reduce stock holdings when macroeconomic indicators suggest further economic slowdown or sell immediately if a company’s fundamentals deteriorate. Additionally, continually tracking and evaluating the performance of the investment portfolio and regularly adjusting the investment strategy to adapt to macroeconomic and market changes is key to maintaining investment success.

Through such methods, investors can more systematically understand and respond to market complexities. This strategy, which combines macro and micro analyses, enables investors to make more rational and well-informed decisions in a volatile market environment.

What Should Investors Do Specifically?

Through in-depth exploration, we’ve understood the limitations of technical analysis and the importance of fundamental analysis, as well as how to combine macro and micro perspectives to form a comprehensive investment strategy. So, how should investors specifically operate and improve?

1. Continued Education: Investors should keep up with economic news and market trends, understanding the macroeconomic variables and policy changes that impact the market. Additionally, learning the basic skills of financial analysis enables independent assessment of the financial health of investment targets.
2. Diversified Investment: Avoid investing all in a single stock or industry, but rather, diversify the investment portfolio to spread risk. Consider investments across different industries, markets, and even asset classes to hedge against specific market downturns.
3. Clear Investment Strategy: Based on personal risk tolerance, investment horizon, and financial goals, formulate a clear investment strategy. This includes investment choices, capital allocation, stop-loss points, and profit targets.
4. Regular Portfolio Evaluation: Regularly re-evaluate the performance and structure of the investment portfolio to ensure they still align with your investment goals and market conditions. Adjust strategies to respond to new market and economic situations.
5. Choose the Right Trading Broker: Investors can choose a credible broker for investment, such as Charles Schwab, a globally renowned investment broker. Opening an account with Charles Schwab gives you a bank account of the same name, and you can deposit cryptocurrencies (USDT) into a multi-asset wallet like BiyaPay, then withdraw fiat currency to Charles Schwab for investing in U.S. stocks. You can also search for U.S. stock codes on the platform and make purchases. Investors can, according to their investment strategy, regularly monitor stock prices and buy or sell at the right times.

In Conclusion

The investment market is always full of uncertainties. Economic cycles, policy changes, or global events can cause market fluctuations. Investors should be prepared to remain calm during unfavorable market conditions and avoid impulsive investment decisions based on short-term fluctuations. Successful investing is built on a solid foundation of knowledge, in-depth analysis, and stable emotional management. May every investor find their path in the U.S. stock market and achieve their financial goals.