Globally, the Federal Reserve is expected to continue its rate cutting cycle in 2026, with at least two rate cuts. This may further weaken the US dollar index and increase the risk of stock market adjustments. Trump's recent policies have triggered major turbulence in the international situation and intensified the risk aversion of the market - leading to the US treasury bond market recently being called "triple killing".

The US dollar index continues to decline, dropping from around 110 to 97 in recent weeks. This reflects both the decline in investor confidence in the US dollar and the increase in safe haven demand, with capital shifting from US dollar assets to gold, silver, and other precious metals.

In my "Top 10 Predictions for 2026" released at the end of last year, I made it clear that the long-term upward trend of gold remains unchanged as the money supply continues to exceed expectations and US government debt surges. In the long run, as more US dollars are printed, the price of gold denominated in US dollars will naturally have basic support.

The rise in international gold prices is essentially closely related to de dollarization. The central banks of many countries are selling US treasury bond bonds to increase their physical gold holdings in order to strengthen the gold support of their own currencies. The People's Bank of China has increased its gold reserves for 14 consecutive months, which not only enhances the credibility of the renminbi and promotes its internationalization, but also elevates its global status and reputation.

At the annual meeting of the China Chief Economist Forum in Shanghai, I pointed out in the special discussion on "The Future of the US Dollar and the Global Monetary System" that the share of the US dollar in global trade settlements will gradually decline. Although this process may take time, the trend has emerged: more and more countries are choosing to diversify their reserve assets rather than relying solely on the US dollar.

De dollarization is a major trend. The United States often uses the global status of the US dollar to impose sanctions, weakening people's trust in the currency. More fundamentally, the US government debt has swelled to $38 trillion, with annual interest payments exceeding $1 trillion - accounting for over 20% of government revenue.

The so-called "big and beautiful" bill of the Trump administration aims to reduce taxes on the rich, and may increase US debt by $1 trillion in the next decade. At the same time, the military budget for 2026 has been raised to $1.5 trillion. These measures further exacerbate the fiscal sustainability of the United States.

In the financial market, this has driven up the yield of 10-year US treasury bond bonds. Textbooks often consider this rate of return as a risk-free rate, assuming that a US sovereign default is unimaginable. But the current yield is about 4.5%, which obviously includes a considerable risk premium. In contrast, the 10-year yield in China is about 1.6%.

The global order is undergoing profound changes. The Trump administration's disregard for international law is becoming increasingly evident, with more and more individuals acting based on personal preferences and using the "law of the jungle" approach under the guise of showcasing American strength. However, this behavior exposes weakness: the more radical the posture, the more it reflects anxiety about the decline of hegemony.

An intriguing example is that on January 3rd, the United States actually "invaded Venezuela" and kidnapped President Maduro and his wife for trial in New York - a blatant violation of international law and a clear example of resource driven intervention. Venezuela has the world's largest oil reserves, most of which are heavy crude oil capable of producing diesel and asphalt - key strategic resources.

In addition to oil, the Trump administration is actively procuring copper globally, with US inventories now reaching 400000 tons - a factor contributing to the soaring global copper prices. Copper is crucial for data centers, electric vehicles, and other rapidly growing industries. This strategic hoarding has increased the input costs for Chinese manufacturers, and some air conditioning manufacturers are reportedly preparing to replace copper pipes with aluminum.

On the domestic front, China achieved a 5% GDP growth last year, meeting the official target. However, retail sales growth has slowed down, with only 0.9% year-on-year in December. CPI growth remains flat, while PPI remains negative. This indicates that domestic demand remains weak, which is the core challenge facing the economy. The Central Economic Work Conference has listed enhancing domestic demand as a key policy priority: increasing household income, stimulating consumption, increasing investment, and addressing overcapacity and "export" issues in traditional industries.

2026 marks the first year of the 15th Five Year Plan. With the formation of policy priorities, support will continue to focus on technological innovation in areas such as humanoid robots, semiconductors, computing power and algorithms, controlled nuclear fusion, commercial aerospace, and quantum technology. These fields have performed well in recent years and are expected to remain popular in the market by 2026. The basic logic remains robust.

Liu Yuxi's words - 'By the sunken ship, a thousand sails sail past; Before the withered trees, ten thousand trees spring' - aptly describe the current differences. Looking at traditional industries such as real estate, pessimism dominates. Look at technological innovation, new vitality is emerging. The capital market reflects the real economy: with economic transformation, market opportunities change accordingly.

Although it may not be possible to replicate the extreme divergence of technology stocks almost dominating in 2025 in 2026, technology will still be a key theme. With the maturity of the bull market and the formation of wealth effects, the transfer of household savings to the capital market may accelerate. This year, it is expected that 50 trillion yuan of deposits will mature. These deposits previously had an interest rate of about 3%; Now the transfer may only earn 1%. Savers face a choice: to continue holding their deposits or seek higher returns.

Some risk averse investors may insist on deposits, bonds, bond funds, or wealth management products. And some are attracted by sustained bull markets and significant returns, entering the market through stocks or funds. This rotation may be a key driving force for sustained growth.

The current total amount of household deposits in China is 166 trillion yuan, an increase of 60 trillion yuan in the past five years. In the past, most incremental savings flowed into real estate. Now, this trend is shifting towards the capital market. Once the stock market breaks through 4000 points and the bull market trend becomes clear, the pace of this rotation may significantly accelerate.

Last year, over 27 million new stock accounts were opened, bringing the total to 400 million; The number of fund accounts has reached 700 million. This gradual and long-term bull market may ultimately benefit hundreds of millions of households, helping to rebuild their balance sheets and partially offset the wealth erosion caused by years of declining housing prices. If sustained, the positive spillover of consumption will become increasingly evident.

This bull market carries three historic missions:

Firstly, promoting consumption through the increase in asset value.

Secondly, in order to stabilize the real estate market, investors with rising stocks may eventually turn to housing.

Thirdly, promote the development of innovative technology enterprises, cultivate more unicorns and industry leaders, accelerate economic transformation, and gain competitive advantages in the fourth industrial revolution. In this competition with the United States, we must find a second growth curve that transforms innovation into true productivity.

(The author is the Chief Economist and Fund Manager of First Seafront Fund)