Two Sessions Concludes: Where Will A-Shares Head? Three Core Variables Determine Market Direction

The A-share market in March has always been a key point for bulls and bears to compete, and this year is no exception. The most obvious features are index divergence, sector rotation acceleration, and weak individual stock profitability effects. As the National Two Sessions conclude, the market will enter a phase of policy implementation verification combined with external shocks. The overall pattern is likely to continue oscillating and diverging with structural rotations. The upward space for the indices is limited, but there is support for declines. Opportunities are increasingly focused on inflation-driven logic and the main themes of technological growth. Structural行情 will remain the main theme of the market.

Looking back at the “Two Sessions effect” over the past 15 years in A-shares, market trends follow certain internal rules: Dongwu Securities research shows that before the sessions, policy expectations heat up, and indices tend to rise; during the sessions, policy details are implemented while funds remain cautious, leading to a period of consolidation and volatility; after the sessions, as policy dividends are gradually released, market success rates and returns often improve again.

However, this pattern is not absolute. Each year’s market performance also depends on macroeconomic conditions, policy guidance, and external variables. This year’s Two Sessions, the government work report focuses on high-level technological independence, domestic demand boosting, and industrial upgrading, providing policy support and clear directions for structural opportunities.

Returning to the market, three core variables will directly determine the pace of post-Two Sessions行情:

1. Middle East situation evolution. The ongoing escalation of US-Iran conflicts, blockage of shipping through the Strait of Hormuz, has driven international oil prices sharply higher, with Brent and WTI crude reaching new highs for the period. Global inflation expectations are rising again, benefiting energy sectors like oil, gas, and coal, but also increasing costs for airlines and logistics companies, intensifying sector divergence.

2. Federal Reserve March interest rate meeting guidance. Although the market generally expects the Fed to keep rates unchanged this month, resilient US economic data and inflation concerns triggered by geopolitical conflicts have kept the dollar index strong. Emerging market capital flows face uncertainty; if the Fed signals a hawkish stance, valuation pressures on China’s growth sectors may intensify.

3. The upcoming April earnings season for performance verification. The market has shifted from sentiment-driven to fundamentals-driven. After the disclosure of 2025 annual reports and Q1 2026 reports, stocks with earnings surprises will attract capital, while those underperforming expectations may remain under pressure, becoming key volatility drivers.

From a sector allocation perspective, structural opportunities after the Two Sessions still focus on two main themes: First, sectors related to inflation logic, driven by geopolitical conflicts pushing energy and resource prices higher—short-term trading opportunities exist in oil, metals, and other commodities. Second, the main theme of technological growth, as the Two Sessions emphasize innovation as a development priority. Fields like AI, integrated circuits, new computing infrastructure, and low-altitude economy receive policy tilt. Coupled with exploding global AI computing demand and accelerated domestic substitution, segments like hardware, optical modules, and semiconductors still offer capital allocation opportunities and are expected to be long-term market themes.

In terms of operational strategy, short-term market volatility is inevitable. Investors should remain cautious and avoid blindly chasing highs. It is recommended to reduce holdings of stocks with excessive short-term gains and insufficient fundamentals, focus on sectors and targets with strong policy implementation certainty and sustainable earnings improvement, and closely monitor Middle East developments, Fed policy moves, and earnings disclosures. Flexibly adjust positions to seize structural opportunities. In the medium to long term, under the backdrop of policy support, economic recovery, and industrial trend upward, the resilience of the A-share market remains strong. After consolidation, structural opportunities are still expected to emerge, with the core being selective track choices, focusing on earnings, and capturing high-quality development investment themes.