Key Takeaways The year 2026 presents both long-term and short-term challenges for asset allocation. In the medium to long term, China has entered a low-interest-rate era, diminishing the historical effectiveness of equity-bond hedging strategies. In the short term, the economy is transitioning between old and new growth drivers, pushing investor risk preferences toward extremes. However, growing confidence in China’s governance, coupled with recovering economic and inflation data—alongside thriving tech sector developments—has moderated sentiment. Pessimists are revising expectations, while optimists are turning more rational, leading risk preferences to converge toward a balanced middle.
**Low-Rate Environment: Focus on Yield Enhancement and Volatility Reduction** Yield enhancement hinges on diversifying across two asset classes, while volatility control relies on three key tools. Mature markets that have navigated low-rate periods—such as the Yale Endowment and Bridgewater—demonstrate that expanding into overseas and alternative assets is critical for yield generation. Yet, broader asset exposure inevitably raises uncertainty, necessitating refined risk management via hedging, risk transfer, and avoidance strategies.
**Risk Appetite Reversion: Low-Vol Strategies for Flexibility, High-Vol Strategies for Risk Control** For low-volatility strategies, focus on domestic fixed-income opportunities and overseas coupon plays in bonds, shift from dividend stocks to mid-cap blue chips in equities, and explore commodities like gold. For high-volatility strategies, diversify beyond U.S. equities into other global markets, rebalance A-share tech exposure toward mid-cap blue chips, and leverage commodities/derivatives for portfolio hedging.
**2026 Strategy: Passive as Shield, Active as Spear** Passive allocation—acting as a "shield"—can achieve risk diversification by broadening asset types. Key areas include commodities (gold, base metals), overseas assets for diversification, alternative assets like REITs, and high-coupon foreign bonds (while hedging RMB liability risks). Active management—the "spear"—entails low-vol strategies for upside and high-vol strategies for risk mitigation. Tactically, this involves equity style rotation, tactical bond opportunities, multi-strategy enhancements (balancing trends and mean reversion), and portfolio-level risk mitigation tools.
**Risks** 1. Tail-risk events in 2026 may disrupt outcomes. 2. Historical data offers limited forward guidance.
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