Gf Securities has released a research report highlighting four critical macro factors currently influencing asset pricing. The firm points out that equities as risk assets are still favored. The global AI narrative cycle continues, but its aggregate effects are expected to gradually lead to a divergence in expectations, with the U.S. stock market transitioning to a phase characterized by differentiation. Regarding domestic assets, export and technology themes have been largely priced in, while pro-cyclical sectors offer favorable risk-reward ratios with improving odds of success, indicating a strengthening trend towards asset allocation balance. However, these four factors are subject to potential changes, necessitating close monitoring and preparedness for scenario shifts to avoid overexposure to any single outcome.
The main views of Gf Securities are as follows: For current asset pricing, four macro clues are crucial, yet they currently lack clear, one-sided, or definitive directions. These can be likened to four "switches":
Switch One: The Geopolitical Switch. The situation in the Middle East remains unclear. Recent reports indicate ongoing negotiations surrounding a U.S.-Iran memorandum of understanding. While a hardline stance was reiterated, talks reportedly concluded without a definitive outcome. Iran has firmly denied reaching any agreement and reaffirmed its control over the Strait of Hormuz.
Switch Two: The Federal Reserve Switch. The direction of Federal Reserve policy is currently ambiguous. The policy stance has been associated with "rate cuts and balance sheet reduction," but conditions for rate cuts now appear absent. Last week, several Fed officials warned that the core inflation level remains too high, suggesting the possibility of being forced into tightening measures if high inflation persists. Current Fed Watch data indicates a 51.8% market probability of unchanged rates by the end of 2026, with a 48% probability of a rate hike.
Switch Three: The AI Aggregate Effect Switch. One aggregate effect of AI is driving new investment and boosting labor productivity. Currently, capital expenditure growth driven by AI remains high, and the wave of AI agents is still gaining momentum. The second aggregate effect of AI is its impact on short-term employment. The U.S. non-farm payroll data for April, released in early May, was generally positive, but employment in the information sector (down 13,000) and the financial sector (down 11,000) declined significantly. This suggests that employment changes are beginning to appear in sectors highly exposed to AI. Logically, if the U.S. unemployment rate shows a significant increase subsequently, it could affect corporate profits and cash flows, thereby impacting the sustainability of AI-related capital expenditures.
Switch Four: The Chinese Domestic Demand Switch. Since 2025, the relatively stronger sectors of the domestic economy have been exports and technology, while the relatively weaker sectors have been investment and consumption. Fixed asset investment and consumption showed preliminary improvement in Q1 this year but experienced a slight pullback in April, indicating that the domestic demand trend remains unstable. A positive signal is the latest May BCI data, where the corporate investment outlook index hit a yearly high, suggesting that policy-driven financial tools are beginning to be implemented and have an effect. If fixed asset investment shows a sustained recovery, it could potentially boost overall domestic demand, including consumption.
The preferred assumption is that geopolitical tensions, despite twists, will ultimately ease; the Federal Reserve will maintain a "no hike, no cut" wait-and-see stance; U.S. employment will continue to loosen moderately under AI's structural impact without triggering a recession; and domestic demand in China will begin to show preliminary improvement from the end of Q2, driven by the implementation of policy financial tools and the recovery of fixed asset investment. Among these, the geopolitical switch has a "floor" effect on assets, and its resolution could lead to a temporary, short-term rise in risk appetite.
Overall, under this combination, equities as risk assets remain advantageous. The global AI narrative cycle persists, but its aggregate effects will gradually lead to a divergence in expectations, with the U.S. stock market transitioning to a phase of differentiation. For domestic assets, export and technology themes are fully priced, while pro-cyclical sectors offer favorable odds and improving success rates, strengthening the characteristic of balanced asset allocation. However, these four clues are not without variables, requiring close tracking and preparation for scenario shifts to avoid excessive bets on any single direction.
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