Guo Lei: The five prevailing narratives in the global market, with the core being the weakening of dollar credit; however, it is unlikely that the dollar will weaken unilaterally by 2026, and the second phase of the A-share bull market may form under certain conditions

On the afternoon of January 7, renowned economist Guo Lei delivered his latest analysis on the global macro narrative and major asset allocation for 2026. The investment workbook representative summarized the key points as follows: In 2025, four types of assets will significantly outperform. The first type is precious metals, such as gold and silver; the second type is non-ferrous metals; the third type is emerging market stocks, such as A-shares, the South Korean stock market, and the Vietnamese stock market; the fourth type is global technology stocks. Behind this is actually a series of rising global narratives. The first narrative is the weakening of U.S. dollar credit; the second narrative is that gold is seen as the pricing anchor for a new round of monetary systems; the third narrative is the reshaping of global industrial and supply chains; the fourth narrative is that AI computing power is the infrastructure of a new stage; the fifth narrative is that non-ferrous metals are the "crude oil" of the AI era. Among these, U.S. dollar credit is the core narrative. Looking ahead to the next stage, we believe that this round of narratives is not yet at the point of ending or reversing. For 2026, we understand that the narratives may converge compared to 2025. Looking towards 2026, we estimate that some marginal changes are occurring or about to occur. The first is the convergence of global liquidity... In 2026, the U.S. dollar may not weaken unilaterally; the second is the pricing of precious metals; the third is the emergence of new pricing logic for non-ferrous metals; the fourth is changes in AI capital expenditures. If this round of popular narratives ends, from the perspective of the next decade, some potential clues may form the next round of popular narratives. The first is the industrialization of southern countries; the second is the second round of globalization for Chinese enterprises; the third is the scenario-based application of AI; the fourth is the increase in consumption rates. In 2026, there are still conditions to achieve the second phase of overall market pricing (bull market). The last bull market in bonds included the overlap of four factors, and all four clues have already been reflected. Currently, these four clues have reached a turning point. Looking ahead to next year, for the interest rates in 2026, we understand that the logic is similar to that of stocks—pricing will converge on the narratives, and fundamental pricing clues will moderately return. The following is the essence compiled by the investment workbook representative (WeChat ID: touzizuoyeben), shared with everyone: Four types of assets will outperform in 2025, behind which is a series of rising global market narratives Here, I would like to share my views on the macro fundamentals for 2026. My title is "Global Narratives and the Chinese Economy." This is clearly the two main lines at the current macro level. Let’s start with the first main line, which is the global narrative. The major assets in 2025 will show very distinct style characteristics. If we look back, there are four types of assets that will significantly outperform. The first type is precious metals, such as gold and silver; the second type is non-ferrous metals; the third type is emerging market stocks, such as A-shares, the South Korean stock market, and the Vietnamese stock market; The fourth category is global technology stocks. The reason these four asset classes have significantly outperformed is actually due to a series of rising global narratives. The first narrative is the weakening of dollar credit. We know that 2025 is the year of interest rate cuts in the United States, and the narrowing of interest rate differentials will lead to a weaker dollar. But in reality, it’s not just about interest rate differentials—by 2025, we can see the characteristics of weakened dollar credit also reflected in asset pricing. This may be related to the market's understanding of the current U.S. policy framework, namely Trump's model of imposing tariffs externally and expanding fiscal policy internally. Will this model be viable in the future and can it be sustained long-term? The uncertainty surrounding this translates into an increase in the credit risk premium of dollar assets. In this process, all assets benchmarked against the dollar have essentially benefited from price increases. The second narrative is about a new round of monetary systems. Gold is seen as the pricing anchor of this new monetary system. In fact, a similar narrative emerged around 2010 to 2012. At that time, we were in a post-crisis era, and our current situation is somewhat similar. This brought a premium to precious metals. The third narrative involves global industrial and supply chains. In recent years, with changes in the trade environment, new supply chains are emerging in regions such as Eastern Europe, Latin America, Southeast Asia, South Asia, and Africa. Global trade is showing characteristics of regionalization, fragmentation, and backup. Thus, the reshaping of global industrial and supply chains has become a popular narrative and profoundly influences asset pricing in 2025. So, what represents the future of this new round of industrial chains? Artificial intelligence is considered the infrastructure of the new industrial chain, with computing power especially viewed as the foundation of all foundations (the fourth narrative: AI computing power is the infrastructure of the new stage). Therefore, competition among major economies in computing power has become a key clue for pricing in all financial markets in 2025. This further drives demand for upstream non-ferrous metals. In fact, over the past decade, all emerging industries have increased their use of non-ferrous metals, from new energy vehicles to renewable energy, to 5G communications, and now to AI computing power. Thus, some viewpoints suggest that (the fifth narrative) non-ferrous metals are the "crude oil" of the AI era. This trend has a profound impact on the pricing elasticity of non-ferrous metals in 2025. We know that behavioral economics master Robert Shiller has a book called "Narrative Economics." In that book, he argues that traditional economics is based on two fundamental assumptions: one is rational individuals, and the other is market pricing. However, in reality, both of these assumptions are incomplete. One factor that is easily overlooked is narrative. Narrative represents the zeitgeist of an era; it influences both micro behavior and macro phenomena. Moreover, Robert Shiller believes that narratives are not spread in the same way as market pricing, but sometimes resemble basic epidemiological models of transmission. From his framework, from 2020 to 2024, there was a very popular theory called "balance sheet recession," which can explain many economic phenomena and also impacts asset pricing But this year we found that no one is talking about this framework anymore. From Robert Shiller's perspective, it seems that the peak of this narrative cycle has already passed. Similarly, we can view this series of new logics that will become popular in 2025 as a new round of narrative. The core of this is the weakening of dollar credit, which further gives rise to a new round of monetary system—gold is considered the pricing anchor of this new monetary system. Beyond that, there is the reshaping of global industrial and supply chains—artificial intelligence is regarded as the infrastructure of the new industrial chain, and non-ferrous metals are seen as the "crude oil" of this new phase. Robert Shiller calls this the "narrative constellation," which forms a series of interconnected narratives, much like the distribution of constellations. This should be one of the biggest characteristics of the global macro environment in 2025. We are currently not at the end of this narrative cycle Why has this narrative emerged? I understand that the disruption of macro continuity is a very important background. We know that for traditional economics, continuity and stability are key assumptions. As Marshall said in microeconomics: "Nature does not have mutations." However, in the past two years, a complete mutation has occurred—from the global fiscal environment, monetary environment, trade environment, to the technological environment. In this context, people will attempt to explain the future with a new framework, which is the natural soil for the emergence of narratives. Looking ahead to the next phase, we are currently not at the end or reversal of this narrative cycle. From Robert Shiller's behavioral economics framework, the end of a narrative cycle generally occurs under several scenarios: The first scenario is the falsification of the premise of the idea. For example, historically, adjustments in gold often stem from the contraction of deficit rates in major economies, and similar phenomena have not yet appeared. Second, being replaced by a new popular narrative, which has not happened yet. Third, the peak of a landmark narrative, such as the bursting of the tech bubble in 1999 or the global financial crisis in 2008, which has also not occurred yet. Therefore, we are currently not at the end of this narrative cycle. The narrative in 2026 may converge more than in 2025 However, looking towards 2026, we estimate that some marginal changes are occurring or are about to occur. The first possibility is the convergence of global liquidity. The weakening of the dollar in 2025 is a major premise for many narratives to hold. An important background for the weakening of the dollar in 2025 is the interest rate cuts in the U.S. and the weakening of the dollar, which has already been relatively well expressed in the current dollar pricing. Looking towards 2026, the space for interest rate cuts in the U.S. is narrowing, and the Fed's own dot plot expectation indicates only one cut; even if we expect a bit more than one, it may be expressed by the first half of 2026. At the same time, the U.S. economy in 2026 may perform better than Europe, which could also bring favorable logic for the dollar. Therefore, the dollar may not unilaterally weaken in 2026. We also see that the Bank of Japan has raised interest rates, which has changed the pricing conditions for the yen. The yen is a major funding currency for global carry trades, which will further affect global liquidity. This is the first potential change we need to pay attention to in 2026 The second is precious metals. Central bank gold purchases in 2025 are a very important fundamental for precious metal pricing. Some central banks have already indicated that they hold enough gold. At the same time, we look at years in history when the annual return on gold was relatively high, such as 1979, when a series of pricing factors such as geopolitical issues, inflation, and the monetary system were concentrated. However, note that after a significant rise in 1979, the overall return on gold in 1980 also clearly tended to converge. This is the second logic we need to pay attention to in 2026. Third, non-ferrous metals. New industries are indeed increasing their use of non-ferrous metals, but in the foreseeable future, the usage remains at a level that is not too high. For example, looking at the data center calculations from the IEA regarding copper usage, it is expected that it will not be too high in the next five years. 2025 does not have the same gap between apparent consumption and production that was seen during the last cycle (such as in 2020 and 2021) when copper prices rose. This actual gap is not very obvious. Therefore, the supply and demand for non-ferrous metals in 2026 may present a new pricing logic. The fourth point is AI capital expenditure. This is a very important premise for the narrative formation in 2025. The growth rate of AI capital expenditure has been rising, but looking towards 2026: First, it will face a very high base; Second, there has not yet been a blockbuster, leading business model formed; Third, similar to the United States, its electricity supply is not as abundant as ours, and bottlenecks in the power sector are also forming. Therefore, if a year-on-year inflection point in AI capital expenditure growth occurs in 2026, it may have a certain impact on the narrative. At the same time, we see that the price-to-earnings ratio of the S&P 500 in the U.S. stock market is already at a relatively high position—over the past hundred years, it is possibly second only to the relative high in 1999. Thus, we understand that the narrative in 2026 may converge compared to 2025. This is something we need to pay attention to. The narrative has a non-falsifiable nature in the short term, the core narrative is the credit of the U.S. dollar In fact, the narrative has already begun to have a profound impact on the entire investment research system. Regardless of whether the future narrative tends to converge or strengthen, I believe that the narrative, as part of the investment research framework, requires further study and consideration. The traditional investment research system is actually built on several variables: one is economic fundamentals or corporate profit fundamentals; the second is the mean reversion of the economy and corporate profits, which corresponds to the mean reversion of asset pricing; the third is the cost-performance principle, such as our focus on the Sharpe ratio of assets, etc. However, you will find that during periods when the narrative has a significant impact, many popular narratives are quite grand, and their entire verification timeline is relatively long, thus possessing a non-falsifiable nature in the short term; Second, many narratives easily lead to positive feedback loops, which are not typical mean reversion; Thirdly, our traditional investment research is based on the principle of cost-effectiveness, which relies on the allocation between assets. However, during the phase when narratives are popular, different assets may form relatively independent risk-return paradigms. Therefore, we need to reconsider the impact of such a variable within our investment research framework. For example, I think we can distinguish the levels of narratives, whether it is a strategic narrative or a tactical-level narrative; We can identify the core narratives among them, such as the core narrative of dollar credit that we just mentioned in the popular narrative. We can establish an analysis framework for the entire lifecycle of narratives: whether it is currently in the germination period, acceleration period, peak period, or decline period; We can establish some verification indicators related to narratives; at the same time, we can also combine some relatively effective strategies for different narrative stages, such as momentum strategies—unlike value strategies (value investing) that focus on how much an asset is worth, it focuses more on what the asset is currently pricing; At the same time, we also need to moderately control the related risks brought by narrative drawdowns. In the medium term, the next round of popular narratives has four directions If this round of popular narratives ends, from the perspective of the next ten years, we believe that there are some potential clues in the medium term that may form the next round of popular narratives. For example, the first is the industrialization of southern countries. We can see that this year, China's export of construction machinery is very high. In fact, not only construction machinery but also agricultural machinery, fertilizers, steel billets, cement, etc., are all seeing an increase in export volume. Behind this is the initiation of some new industrialized countries, such as the six countries in East Africa. This will have a profound impact on our entire manufacturing industry, including export enterprises, in the medium term. The second is the overseas expansion of Chinese enterprises, or what we call the second round of globalization, which is still continuing. The third point I want to mention is the scenarization of AI. From the basic laws of technological revolutions, the first stage is often characterized by narrow applications of technology and exploration of business models, known as the technology introduction period; The second stage is the expansion period of technology—broad applications of technology, new business models, the formation of new industries, and improvements in labor productivity. The second stage often brings significant opportunities due to scenarization. In fact, from the characteristics of the Chinese economy, it should still have very obvious advantages in scenarization, such as our very high population density, the characteristics of the entire industrial chain, and relatively low business thresholds. Therefore, from a medium-term perspective, I believe that the scenarization of AI may become the next round of popular narratives. The fourth is the increase in consumption rates. From the perspective of our entire urban and rural residents' income increase plan in the medium term, there should be a period in the future that will be reflected in the overall increase in consumption rates. So, these are several major clues that may become the next round of popular narratives from a medium-term perspective. By 2026, the balance of the Chinese economy will significantly increase Having discussed the first aspect of "narratives," we now turn to the second aspect, which is the fundamentals. We estimate that the GDP growth rate in 2026 will be roughly the same as in 2025, still maintaining around 5%. At the same time, the balance of the economy will significantly increase In 2025, the main support will come from exports and "two new" sectors; by 2026, we expect an improvement in the balance of the economy from consumption to investment to real estate to traditional manufacturing. This process corresponds to an improvement in price levels, and nominal growth will show a significant improvement compared to 2025. This is our view on the domestic economy. Conditional Realization of the Second Phase of the Bull Market in 2026 Next, let's discuss our understanding of the asset side. In every bull market, the market will explore the second phase of the bull market. If you look back, you will find that there are two very important conditions for the establishment of the second phase: The first condition is valuation—during the early stage of a bull market, valuations cannot be overstretched, and overall pricing cannot be too high; the second necessary condition is that our economy or corporate profits must be sustainable. From these two conditions, we understand that the first condition should be roughly met. From historical basic trends, the annualized compound return rate of the Wind All A index is roughly in line with the level of nominal GDP—just like from 2005 to 2019, it was around 12%; In the past six years (2020 to 2025), our nominal GDP annualized compound growth rate should be around 5.7%, and by the last trading day of 2025, the six-year compound return rate of the Wind All A index is roughly around 6.8%; When considering 2026—the seven-year compound return rate is about 5.8%. This is still within a roughly reasonable range. Secondly, as we mentioned earlier, the economy and corporate profits must be sustainable. If we follow our expectations for the economy—actual growth remains stable, and nominal growth tends to improve (which means price conditions improve), this will correspond to a rebound in corporate profit levels. As we know, the proportion of manufacturing companies in the A-share market is very high, and profits are highly sensitive to PPI. If we expect PPI to converge to around negative 0.6% in 2026, then we anticipate that the profits of industrial enterprises above a designated size are likely to recover to levels of 6% to 7%. This may provide fundamental support for profit-sensitive industries. Therefore, based on these two conditions, we believe that 2026 is still conditionally capable of realizing the second phase of market pricing. This round of bond bull market has four clues, and we have reached a turning point in 2026, where fundamental pricing clues will moderately return. Another aspect is bonds. Looking back, the last round of the bond bull market included the overlap of four factors: First, concentrated adjustments in nominal growth; second, concentrated contraction in the construction industry, which is most sensitive to financing; third, concentrated reductions in policy interest rates; fourth, the short-termization of long-term trends, such as market discussions on balance sheet recessions, etc. After this round of bond bull market, all four clues have been fully reflected. From our current perspective, all four clues have reached a turning point Looking ahead to next year, for the interest rates in 2026, we understand that the logic is similar to that of stocks—pricing based on narratives will converge, and fundamental pricing clues will moderately revert. The fundamental basis for interest rates is nominal GDP: before 2020, the relationship between nominal GDP and the yield on ten-year government bonds was basically 2.6 times; from 2020 to 2025, it is roughly 2.2 to 2.3 times. Now, looking at the interest rates for 2026—if nominal GDP returns to 5.0%, then theoretically, our ten-year government bond yield should be around 1.9% to 2.2%; if nominal GDP is 4.8%, then we might be around 1.8% to 2.0%. Of course, the specific slope in the future will depend on our further observation of the overall nominal growth slope. Source: Investment Workbook Pro, Author: Wang Li For more insights from industry leaders, please follow↓↓↓ Risk Warning and Disclaimer The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. 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