To The Moon

The year 2025, which is drawing to a close, saw many unexpected changes in the global financial markets. For example, $Gold - main 2602(GCmain)$ surged, European stock markets outperformed US stocks, and cryptocurrencies like $Bitcoin(BTC.USD.CC)$ experienced significant declines.

2025 was also the year I spent the most time investing and researching in global markets. My travels included the UAE, Iraq, and India, and I conducted numerous investment sharing events in Canada and Italy. Within the US, I had the opportunity to attend training at Elon Musk's Starbase and the NASA Space Academy at the Marshall Space Center in Alabama.

Many of the companies we've partnered with are listed on the New York Stock Exchange and Nasdaq, and we are grateful for the many partners in the capital markets. Academically, I continued teaching graduate courses at New York University and was invited to give numerous lectures at institutions such as Harvard Davis Center, the University of Pennsylvania, Cheung Kong Graduate School of Business, Uweb School of Business, North American Real Estate Academy, and GCFF Canada, in cities including Boston, Philadelphia, Los Angeles, Vancouver, Toronto, Dallas, and Houston.

In this year-end review, I hope to reflect on last year's predictions and propose an updated framework for global investment in 2026 and beyond, for discussion and critique. I recall that many years ago, after graduating with a PhD from the University of Lausanne in Switzerland and joining Morgan Stanley on Wall Street, I would study the annual top ten global economic predictions of the following year from the company's chief US economist, Byron Wien. His exchanges with then-Morgan Stanley's chief economist, Steven Roach, on macroeconomics were incredibly beneficial to us. Mr. Wien later went to $BlackRock(BLK)$ and continued publishing his annual top ten predictions until his death at the age of 90. He also served as chairman of the Harvard Club in New York. Mr. Roach later became chairman of Morgan Stanley Asia in Hong Kong, and then taught at Yale University, where he continues to publish books and articles, paying close attention to China. He can often be seen at events in New York and New Haven.

In recent years, major financial institutions in the United States have been actively promoting young people, and many local leaders are now in their 30s. Meanwhile, the decade beginning in 2020 has witnessed the largest intergenerational wealth transfer in human history. The most successful and wealthiest generation to grow up after World War II, including in the United States and Asia, faces the challenge of passing on wealth and values to numerous families. This year, I was fortunate to be invited to participate in succession planning activities organized by some of the top elite organizations in the United States, and I benefited greatly, learning many invaluable lessons.

This year also marks my tenth analysis from a macroeconomic perspective, making ten predictions about the global economy in 2026. From a micro-investment perspective, this year, in addition to continuing our work in the traditional financial sector, our company has also begun to advance in the digital asset field, creating the CoinBridge platform. From a macro perspective, this year we have been honored to participate in activities of several renowned think tanks and university clubs, including the Economic Club of New York, the Bretton Woods Committee, the Council on Foreign Relations, the National Small Business Leadership Council, the Miami Economic Club, the Shadow Monetary Policy Committee, the Harvard Club, and the Yale Club, providing opportunities for extensive macroeconomic and political exchanges and dialogues. We have also begun in-depth collaborations with state and local institutions in New York, Dallas, Houston, Washington, and other cities to help businesses meet their international financial and trade needs.

The forecasts in this article are based on discussions with top buy-side and sell-side financial institutions on Wall Street, analysis of extensive financial data, and discussions with leading academic institutions.

Core viewpoint: 2026 is expected to be a year of declining volatility in global risk assets, weak employment, slow consumption growth, and economic growth reliant on investment. We recommend investors allocate a balanced portfolio across three asset classes: publicly traded companies, privately held companies, and digital currencies. In terms of industry sectors, it's advisable to moderately realize profits from investments in technology, particularly artificial intelligence, to reduce concentration and increase allocations to sectors like healthcare, emerging industries such as space exploration, and emerging digital currency assets, thereby achieving overall net asset appreciation and reducing risk exposure. Of course, market uncertainty is a constant theme. Investors should continue to pay close attention to fundamentals and changes in various macroeconomic factors, making corresponding adjustments to their investments to outpace currency depreciation and avoid permanent asset losses.

These views are not intended as investment advice but rather as market information for reference only. Criticism and corrections are welcome. This prediction also benefited from the assistance and support of colleagues and partners at our three affiliated companies (Horizon Holdings, Horizon Financial, and CoinBridge).

Welcome to read the full text below:

I. Review of the Top Ten Predictions for 2025

Of the ten predictions made at the end of 2024, one was incorrect, eight were accurate, and one was partially accurate. The overall accuracy rate was approximately 85%. Of course, looking back now, the most accurate prediction from a year ago was that US stocks would experience a significant correction in the second quarter of this year. US stocks entered a bear market in April and May, with the $NASDAQ(.IXIC)$ falling by more than 30%. This was due to both the impact of the White House's tariff policies and the fear of downside risks among many profit-takers. There's a saying on Wall Street: "Prediction is particularly difficult, especially predictions about the future."

KevinChen:Top 10 Global Financial Market Predictions for 2025

Barton Biggs, another macroeconomic research master at Morgan Stanley, once said: When making predictions, it's not just about the conclusion, but more importantly, the logic. The logic might be accurate, but the conclusion might be wrong. Currently, the biggest problem with the global macroeconomy is that the logic of a prediction might be accurate, but the outcome might be unexpected. For example, the digital asset industry has seen tremendous growth this year, but some mainstream cryptocurrencies, such as Bitcoin, have experienced significant declines.

2. 10 Predictions for 2026

Byron Wayne once said that when making predictions, it's necessary to consider some low-probability, high-impact events. Just like Brexit in 2015, which was predicted to be a low-probability event, but had a huge impact on the economies of the UK and Europe, here are my top ten predictions for 2026.

Besides the predictions themselves, I also hope to outline the analytical logic for discussion and research. In particular, about three of them are low-probability events that could potentially have a significant impact.

1. The Federal Reserve slightly cuts interest rates, maintaining high US interest rates.

The US monetary policy led by the Federal Reserve has a huge influence on global financial markets. This year, the Fed's rate cuts came much later than expected, and the magnitude of the cuts was also lower than expected. At the beginning of 2025, everyone was expecting a Fed rate cut. However, the Fed remained inactive until September, when it finally cut rates for the first time, followed by cuts in October and December, totaling 75 basis points. This has left many highly leveraged sectors that expected lower interest rates, such as real estate and utilities, in a very difficult position. The Fed's minimal rate cuts this year can be summarized in one sentence: "Inflation hasn't completely won, and the economy hasn't clearly lost." Specifically, there are several key points: First, inflation remains high, especially "stubborn inflation." While headline CPI has fallen significantly from its peak, core inflation issues remain:

• Service sector inflation (rent, healthcare, insurance, education) is declining slowly.

• Wage growth remains high, pushing up service prices.

• Recurring energy and geopolitical conflicts destabilize inflation expectations.

The Federal Reserve's biggest concern is that premature interest rate cuts could lead to a rebound in inflation (a lesson from the 1970s). This will continue in 2026. Logically, high interest rates should significantly drag down the economy, but in reality:

• GDP growth remains above potential growth.

• Unemployment remains low, and layoffs have not spread systematically.

• Consumption remains strong (fiscal deficit + relatively healthy household balance sheets).

(FOMC voting members have highly divergent expectations for 2026)

In fact, the Great Beauty Act will be implemented in January 2026. US companies can directly deduct costs from capital account investments. For example, companies can directly deduct costs from purchases of factories, machinery, and private jets. This will significantly boost investment and consumption, and may even lead to overheating of the economy. In this scenario, the Federal Reserve's inflation concerns will only persist. Furthermore, the Fed will be inaugurated next May, with a new chairman taking office. Powell is expected to be cautious in the final months of his term, refraining from making further interest rate decisions. Whether Hassett, Warsh, or Betsent is chairman, professional judgment will be paramount, rather than rapid rate cuts. Therefore, unless unforeseen global events occur, the Fed will likely only cut rates once or twice next year, maintaining its high-interest-rate policy.

2. Accelerated US Economic Growth

All indications suggest that the US economy will surpass this year's growth rate in 2026, with real GDP growth at 2-2.5%, and nominal GDP growth around 5% including the inflation deflator. Many are pessimistic about the US economy, but much of this pessimism is based on unrealistic hopes rather than reality. Having traveled extensively throughout the US and the world annually, I have firsthand observations. This year, US and other international companies have significantly increased their investments in the US. These new projects will enter the substantial construction phase in 2026, and investment will significantly boost the economy. It's worth noting that nominal GDP growth is a crucial indicator. Many people only look at real GDP growth. However, wages, living costs, corporate profits, and the stock market are all based on nominal dollars. High nominal GDP growth provides significant benefits to society.

(Goldman Sachs raises its 2026 US economic growth forecast)

In 2025, due to a change in the White House leadership, the US experienced numerous policy changes, including increased tariffs on foreign goods, tax cuts domestically, negative net immigration, and large-scale deregulation. These four policies, when implemented in the first half of the year, caused severe shocks and created significant uncertainty for businesses. The peak of policy uncertainty has now passed. Tariffs have generally decreased, and the tax cuts under the Great Beauty Act will greatly stimulate investment and consumption next year. The effects of large-scale deregulation in sectors such as finance $Financial Select Sector SPDR Fund(XLF)$ , technology $Technology Select Sector SPDR Fund(XLK)$ , pharmaceuticals $Spdr S&P Biotech Etf(XBI)$ , energy $Energy Select Sector SPDR Fund(XLE)$ , and environmental protection will be reflected in US economic growth data in 2026. At a gathering of top American entrepreneurs I attended, several CEOs of leading Silicon Valley companies stated that in the past few years, US federal agencies had been constantly suppressing them, "hindering" the development of American companies through lawsuits, executive orders, and antitrust measures. However, starting in January of this year, US federal agencies made a 180-degree turn, continuously pressuring them to "accelerate" innovation.

3. Comprehensive Development of Artificial Intelligence

Discussions about the "bubble" in artificial intelligence have never ceased and have recently become increasingly prominent. My observation and prediction is that investment, development, and application of artificial intelligence technology will continue to expand on a large scale in 2026. If there is a bubble, it will only inflate further next year. From the perspective of AI hardware, chips are no longer limited to Nvidia's GPUs; Google's TPUs and chips from Apple and other companies are now competing in the AI arena. Three major U.S. hyperscale cloud service providers—Amazon, Microsoft, and Google—are ramping up their investments in generative artificial intelligence (AI) technologies:

● $Amazon.com(AMZN)$ is integrating AI into its retail and cloud services for a range of tasks, from optimizing customer experience to machine learning and code generation for its business customers.

● $Microsoft(MSFT)$, through a partnership with OpenAI, is integrating ChatGPT into its Bing search engine and Azure ecosystem, enabling users to access a broad range of AI solutions, including workflow automation, coding, customer service, application development, and data analytics.

● $Alphabet(GOOG)$ is integrating its most powerful generative AI model, Gemini, into business and enterprise workspaces. Its multimodal capabilities—processing text, images, audio, and video across multiple platforms—help businesses simplify and automate a variety of complex tasks.

The widespread adoption of AI products by these three companies, as well as other hyperscale cloud service providers such as IBM (IBM) and Oracle (ORCL), suggests that companies leveraging this new technology may be gaining a competitive advantage. Companies and those analyzing and investing in these companies generally believe that the more advanced a company's AI tools are, the more competitive its production potential will be. Therefore, hyperscale cloud service providers capable of offering more advanced AI tools are not only likely to attract more business users but may also provide these users with a significant technological advantage over their competitors. The key point is that hyperscale cloud service providers are major players in the global digital infrastructure sector. Demand for their products and services is likely to continue to grow, which represents a potential long-term investment opportunity for investors. However, it's worth noting that many hyperscale cloud service providers (especially Amazon, Microsoft, and Alphabet) are already some of the largest companies on the planet. Their market capitalization has grown over decades, thanks not only to their cloud services but also to other products and services.

(The Evolution of Data Centers: From Traditional to Hyperscale)

Of course, Elon Musk's $Tesla Motors(TSLA)$ xAI AI company is also building data centers on a massive scale. Data I've seen shows that total investment in AI-driven data center construction in the US will be around $500 billion in 2025. Investment is expected to reach $600-700 billion in 2026. CoreWeave, Inc. (CRWV), a data center builder, mentioned at an event held on the New York Stock Exchange that their data center construction needs are already booked into 2028-2030. Therefore, it is undeniable that data center construction will drive continued comprehensive advancement of the US artificial intelligence industry in the next two years.

4. Rising Global Unemployment

Currently, major institutions and economic forecasting models indicate a slowdown in global economic growth next year. This projected slowdown will lead to rising unemployment. Simultaneously, employment gaps will widen across different countries/regions, industries, ages, and education levels. From an immigration perspective, the US is very likely to continue experiencing negative net immigration next year, similar to this year, meaning more immigrants will be deported, leading to increased unemployment in their countries of origin. Canada also experienced negative net immigration this year, and this is likely to continue next year. Net immigration to European countries, including several EU member states and the UK, is also declining significantly. An OECD report indicates that employment growth in developed countries will slow, and prolonged economic recessions in developed countries like Germany will also lead to rising unemployment. A report from the International Labour Organization shows that youth unemployment remains high.

(The ratio of declining office building investment to rising data center investment in the US is 1:1)

Looking at 2026, the employment situation remains pessimistic. First, the replacement of jobs by artificial intelligence is undeniable. In particular, many white-collar jobs, including programming, management consulting, accounting, and law, will see increasing replacement by AI. Unemployment rates in sectors such as healthcare, education, and retail will also decline due to the deepening application of AI, leading to layoffs or reduced hiring for entry-level positions. Recently, there's been a saying in the US that software engineers may become the new civil engineers.

(Federal Reserve's Unemployment Rate Forecast for 2026-2028)

The above chart shows the Federal Reserve's forecast for the US unemployment rate over the next few years, predicting a rise next year followed by a decline the year after. I believe this forecast is overly optimistic. With the global population aging rapidly, the social tax burden will only continue to rise. As taxes increase, the unemployment rate will rise in tandem. Especially with the addition of AI, the unemployment problem among young white-collar workers will only worsen. The unemployment problem will not be limited to developed countries; in fact, by 2026, due to factors such as increased trade barriers in developed countries and the resurgence of manufacturing, the unemployment problem in emerging market countries will also worsen.

5. Rapid Development of Digital Currency Assets

2025 will be a milestone year for the development of the digital currency market. The GENIUS Act, passed by the US in May 2025, will digitize the US dollar and legalize stablecoins. This is a proactive move by the US regarding global financial rules.

First, stablecoins will be formally "incorporated," ushering in an era of compliance for crypto finance.

The core significance of the GENIUS Act lies in establishing a federal-level regulatory framework for stablecoins, clearly defining the issuing entities, reserve assets, auditing, and redemption responsibilities. This means stablecoins are no longer gray-area crypto tools but rather quasi-monetary products integrated into the US financial system. As a result, compliant stablecoins (such as USDC and PayPal USD) gain institutional backing, while algorithmic stablecoins and projects lacking transparent reserves will be marginalized or even eliminated. This significantly increases the concentration of the crypto industry and squeezes out non-compliant stablecoins.

Second, stablecoins become an "on-chain extension" of the dollar system, strengthening financial infrastructure.

The GENIUS Act did not choose to have the Federal Reserve directly issue digital dollars, but instead allowed private institutions to issue dollar stablecoins under strong regulation. This model preserves market efficiency while avoiding the political controversy of direct central bank intervention. The law directly prohibits the Federal Reserve or any other US government agency from issuing stablecoins. Stablecoins thus become a functional extension of the dollar on the blockchain, assuming the roles of payment, settlement, and value storage, forming a regulated but highly flexible "shadow dollar system."

Third, it provides structural support for US debt and the US treasury. The bill requires stablecoin reserves to be primarily allocated to cash and short-term U.S. Treasury bonds, naturally making stablecoin issuers major buyers of U.S. Treasury securities. As the stablecoin market expands, the continued demand for T-bills will increase, helping to alleviate U.S. fiscal financing pressures. While this impact is subtle, it has significant structural implications in the medium to long term. The U.S. Treasury Secretary and Federal Reserve Governors have both stated their hope that stablecoins can purchase $1-2 trillion in U.S. Treasury bonds.

Fourth, it strengthens the global influence and geopolitical financial advantages of the dollar.

In emerging markets with high cross-border payment costs and unstable local currencies, compliant dollar stablecoins are equivalent to "digital dollar accounts available to everyone." By institutionalizing stablecoins, the GENIUS Act effectively promotes the penetration of the dollar into the global digital economy, creating a siphon effect on other currencies. From a geopolitical financial perspective, this is a low-cost, highly pervasive tool for the U.S. to maintain and extend dollar hegemony.

Fifth, it sets a model for global stablecoin regulation.

The GENIUS Act provides a clear paradigm for other economies: stablecoins are allowed to exist, but must meet bank-level transparency and risk control requirements. This is likely to influence regulatory designs in the EU, UK, Singapore, and Hong Kong, opening the floodgates for institutional funds to enter the crypto-finance sector and propelling stablecoins from speculative tools to fundamental financial infrastructure. Canada recently initiated legislative proceedings, and its stablecoin bill is expected to closely resemble the US Genius Act.

(Social media photo released by the Bretton Woods Committee: The author and other members attending a Circle/Atlantic Council seminar on digital currencies and global governance)

A number of cryptocurrency institutions went public in 2025, including $Circle Internet Corp.(CRCL)$ , the largest issuer of a USD-compliant stablecoin; cryptocurrency exchanges Gemimi and $Bullish(BLSH)$ ; and C1, a closed-end equity fund for cryptocurrency companies. I believe that many flagship institutions in the cryptocurrency industry, such as BitGo, a leading company in digital asset custody, will successfully IPO in 2026. Parallel to this, core infrastructure institutions in the traditional financial sector will rapidly integrate digital currencies, introducing tokenized assets into traditional finance. Recently, DTCC, the core financial clearing company in the US, announced the start of tokenization on the blockchain, a landmark change. I believe that by 2026, all traditional financial institutions, including buy-side, sell-side, custodian banks, clearing houses, and service providers, will enter the digital currency field. Top exchanges like the New York Stock Exchange, Nasdaq, and Chicago Mercantile Exchange will launch a large number of compliant digital asset securities in 2026, connecting with traditional financial investors. It's worth mentioning that the Genius Act clearly stipulates that stablecoin holders have a higher priority in liquidation than shareholders in the event of issuer bankruptcy. This is a huge endorsement of the security of stablecoins. Besides the US, the Eurozone's stablecoin has officially launched. Compliant stablecoins in local currencies in countries like Brazil and Canada have also been officially issued.

6. Private Equity Funds Continue to Shrink, Private Debt Funds Continue to Expand

Having worked on Wall Street for many years, I can say I've developed a sixth sense for market developments. Looking at the traditional asset management industry over the past three years, the biggest change is the shrinking of private equity funds and the expansion of private debt funds. This can be verified by examining these companies' recruitment, AUM (Amount in Management) size, and project development. Firstly, the assets under management (AUM) of private equity (PE) funds peaked in 2023, and continued to decline in 2024 and 2025. Why is PE size decreasing? In recent years, many companies have gone public with market capitalizations lower than the valuations of private equity funds, significantly impacting their performance. Simultaneously, with unlisted companies having extremely high valuations, investors are less willing to continue investing to "pump and dump" them.

(S&P Global data shows that investable funds for private equity funds peaked in 2023)

In the past, private equity investors were primarily institutional investors. These sovereign wealth funds, university endowments, and pension funds were relatively less sensitive to performance and valuation. Now, private equity investors are mainly high-net-worth clients. They are relatively more focused on performance, worried about losses, and have a lower risk appetite. Therefore, new investors are more willing to invest in private equity funds in the form of debt. The Federal Reserve's high-interest-rate policy has made bond investors relatively satisfied with returns of 8-12%, making them unwilling to invest in private equity funds with lock-up periods of 5-10 years, but preferring to invest in bond funds with only a one-year lock-up period. This trend will only continue in 2026, and many VC-PE funds may face a survival crisis.

7. Russia-Ukraine Truce, European Reconstruction

From a broad perspective, the conflict between Russia and Ukraine began on February 20, 2014, when Russia began annexing Crimea and supporting separatist forces in eastern Ukraine (the Donbas War). In terms of a full-scale outbreak of war, the Russian special military operation that began in February 2022 will mark the fourth year of the conflict. Compared to World War I, which lasted for more than four years, and World War II, which lasted for six years, this military conflict has already been very long. Currently, the war has entered a protracted war of attrition. Both sides are continuously investing large amounts of manpower and resources; Russian casualties may continue to rise, but Ukraine is also facing enormous pressure in terms of manpower and supplies.

• Russia's Strategy: Russia may continue its strategy of protracted warfare, waiting for Ukraine's troop strength, economic support, or Western patience to run out. Simultaneously, the Russian military may continue large-scale airstrikes against Ukrainian infrastructure to weaken Ukraine's war potential and civilian morale.

• Ukraine's Resolve and Challenges: Ukraine has passed its 2026 budget, setting a new record for defense and security spending (approximately $66.1 billion), demonstrating its determination to continue the war. However, it will face significant challenges if external aid (especially the political direction of the United States) becomes significantly uncertain, or if Ukraine's own manpower and logistical pressures continue to increase.

• Technological and Tactical Developments: The competition between the two sides in areas such as drones and electronic warfare will intensify, and the actual situation on the battlefield will remain the decisive factor.

(Image: Google Gemini's conception of a Russia-Ukraine ceasefire)

Although no peace plan has yet achieved a ceasefire, peace between Russia and Ukraine is inevitable in 2026. Firstly, the losses on both sides are staggering, and both are relatively exhausted. Secondly, the US midterm elections next year may put pressure on voters regarding the massive aid to Ukraine. Europe also faces internal pressure to continue supporting Ukraine, with the rise of populist parties potentially impacting their resolve to provide aid. Simultaneously, Europe is preparing for a potential Russian threat; core EU countries like Germany and France have announced increased military spending, the reinstatement of conscription, and military buildup. The Economist recently predicted three possible scenarios for Russia and Ukraine in 2026:

1. The front lines advance at a glacial pace.

2. Both sides become exhausted and reach a stalemate.

3. An agreement of some form is reached.

Of course, some analyses have mentioned extreme scenarios, such as the paralysis of Russia's key oil industry by airstrikes leading to economic collapse, or the collapse of Ukraine's military or political systems. My prediction is a ceasefire, followed by a scenario similar to the 2014-2015 European debt crisis, where the troika—the IMF/World Bank, the EU, and the European Central Bank—jointly provides large-scale assistance to Ukraine and Russia in their reconstruction.

8. Global Countries Compete to Issue Bonds and Devalue Their Assets, Gold Continues its Bull Market

Gold's gains in 2025 far exceeded most people's expectations, leading many to become bearish on gold. I anticipate the $$Gold Futures Contract 2602 (GCmain$$ will continue its bull market in 2026, but the gains will be significantly lower than this year's 60+% increase. Faced with aging populations, excessive government spending, and high fiscal deficits, governments worldwide will continue to issue large amounts of debt in 2026. In fact, due to weak global economic expectations, the impulse to stimulate economic growth through debt issuance will only continue to rise. The debasement trade of the US dollar will spread to other countries, especially the Eurozone and other emerging market countries. The impulse to loosen monetary policy will only lead to continued gold price increases, but the US dollar index is unlikely to decline significantly. Among major economies, Japan faces the greatest challenges, including an aging population and a government debt ratio that is among the highest in the world.

Next year, the Federal Reserve and many other central banks will continue to cut interest rates. As a non-interest-bearing asset, gold's opportunity cost (the cost of holding gold and forgoing interest) will decrease in a declining interest rate environment, increasing its attractiveness. Central banks worldwide, especially those in emerging markets, continue to make large-scale net purchases of gold to diversify foreign exchange reserve risks, reduce dependence on the US dollar, and enhance financial stability.

(Gold Purchases and Sales by Central Banks from 1994 to 2026)

In the cryptocurrency sector, Tether, the largest issuer of stablecoins, is already one of the largest buyers of gold. The company has announced and holds 116 tons of gold, exceeding the gold holdings of most central banks. In the third quarter of 2025, its purchases accounted for 2% of global gold production and 16% of central bank purchases. With the continued large-scale expansion of cryptocurrencies next year, gold buyers will also continue to grow significantly. Of course, the sharp rise in gold prices has attracted a large number of speculators. For gold buyers in the cryptocurrency market, gold is experiencing high-level fluctuations, and volatility is expected to increase in 2026.

(Global Central Government Debt Situation)

9. US Stocks Continue Bull Market, Volatility Lower Than in 2025

The biggest reason for the continued bullish outlook on US stocks in 2026 is the strong corporate profit growth of US listed companies. There's something often overlooked on Wall Street: stock price (P) comes from earnings (E), and profitability is the core pillar. Various data show that US corporate profits will accelerate in 2026: The market generally expects the earnings per share (EPS) growth of $S&P 500(.SPX)$ components to accelerate further, with the growth rate in 2026 expected to be higher than in 2025. AI-Driven Productivity Improvement: Investment and application of artificial intelligence (AI) are considered a major driver of corporate profitability and productivity improvement. Moreover, the efficiency improvements and cost optimizations brought by AI will gradually be reflected in the financial reports of non-tech companies.

(US Stock Earnings Forecast for 2026)

From a monetary policy perspective, the US is expected to continue its easing policies in 2026 (supported by liquidity). Interest Rate Cut Cycle: The market anticipates the Federal Reserve will continue its interest rate cut cycle, lowering borrowing costs, boosting investor risk appetite, and supporting corporate investment and valuations. The Fed's halt to balance sheet reduction has also helped alleviate market concerns about tightening liquidity.

From an industry rotation perspective, AI remains the primary long-term growth theme for US stocks. However, market focus is shifting from the initial broad-based rise of the "MAG7" to AI infrastructure (computing hardware, data centers, power) and a wider range of companies that have successfully deployed AI and achieved productivity improvements. Cyclical Sector Opportunities: As the interest rate cut cycle deepens and the economy recovers cyclically, traditional economic sectors (such as financials, industrials, consumer staples, and healthcare) and small-cap stocks are expected to offer new investment opportunities.

The main risk for US stocks in 2026 is excessive concentration. The dominance of the MAG7 in the technology sector has somewhat diminished this year, particularly with Meta (Facebook) beginning to fall behind. It is highly likely that many non-tech companies will outperform tech companies in terms of earnings, leading to stock returns exceeding the index. Finally, the global supply chain restructuring continues, and multinational corporations continue to face significant cost pressures. We recommend investors adopt a more balanced and diversified allocation to US stocks: increase defensive stocks (such as healthcare), and appropriately reduce positions in tech stocks that have yielded substantial profits, thus reducing concentration. The pharmaceutical sector has underperformed the S&P 500 for three consecutive years, with earnings lagging behind the index by a cumulative 70%. Many pharmaceutical companies have experienced a stock price collapse this year, and we believe next year will see a bottoming out and rebound.

10.The restructuring of global supply chains and manufacturing continues.

The global manufacturing sector has undergone dramatic changes in the past three years, with China's exports rising steadily and the EU's manufacturing sector shrinking rapidly. The Russia-Ukraine war has significantly impacted Europe's energy supply, but this is likely not the core factor. Global energy prices are actually declining:

(Crude oil prices hit a four-year low)

The more fundamental reason is China's manufacturing upgrade. Low-end manufacturing is rapidly shifting to Southeast Asian countries, India is entering the high-end manufacturing sector on a large scale, including electronics and shipbuilding, and the US, under various White House policies, has begun a large-scale return of manufacturing. 2026 will be the year the US, Canada, and Mexico co-host the World Cup, and it will also be a year of continued integration for the USMCA (United States-Canada-Mexico Free Trade Area).

Recently, I visited Elon Musk's SpaceX Starbase and discovered for the first time that this base is located on the US-Mexico border, less than an hour's flight from Monterrey, Mexico's industrial heartland. From Monterrey to Austin to Dallas, this industrial corridor presents enormous opportunities for development in manufacturing, energy, technology research and development, and logistics. We believe global trade volume will decline in 2026, but regional trade integration will accelerate. Integration within trade blocs in Southeast Asia, the Middle East, Central and Eastern Europe, and North America will become increasingly evident.

(Comparison of labor costs in various emerging market countries)

In summary：

2026 is expected to be a year of declining volatility in global risk assets, weak employment, slow consumption growth, and economic growth reliant on investment. We recommend investors maintain a balanced allocation across three asset classes: publicly traded companies, privately held companies, and digital currencies.

In terms of sectors, we suggest moderately realizing profits from investments in technology, particularly artificial intelligence, to reduce concentration, while increasing allocations to sectors such as healthcare, emerging industries like space exploration, and emerging digital currencies to achieve overall net asset growth and reduce risk exposure.

Of course, market uncertainty is a constant theme. Investors should continue to pay close attention to fundamentals and changes in various macroeconomic factors, making corresponding adjustments to their investments to outpace currency depreciation and avoid permanent asset losses.