CICC released a research report stating that in the short term, key events requiring close attention include: 1) The "purchase" of Greenland; currently, Trump has stated he is no longer considering additional tariffs on eight European countries, temporarily easing risks but requiring ongoing monitoring. 2) The Supreme Court's ruling on Trump's tariffs; as the court enters an approximately four-week "intervening recess" starting January 21st, the earliest ruling date may not be until February 20th. 3) Whether Lisa Cook will ultimately be removed from her position as Federal Reserve Governor (oral arguments concluded on January 21st), and the progress of the criminal investigation into Powell. 4) The nomination of a new Fed Chair; Besant stated on January 20th that an announcement could come "as early as next week (January 26th - February 1st)". Under the baseline scenario, the annual outlook is maintained: overall positive for U.S. stocks, with cyclical sectors catching up to tech, also paying attention to small-caps and financials; the dollar is not expected to fall continuously and sharply, and long-term bonds offer trading opportunities. However, if developments continue to exceed expectations, the following are suggested: 1) Safe-haven assets, such as gold; 2) Tech stocks, which may experience sharp short-term volatility, but their fundamental logic is independent of policy fluctuations, allowing for buying on dips after volatility; 3) Resource commodities, which are the "focus" of current trade friction and geopolitical tensions, potentially strengthening their investment value; 4) Avoid U.S. Treasuries, as damage to Fed independence, fiscal sustainability concerns, and "de-dollarization" narratives will create pressure. CICC's main views are as follows.
At the beginning of 2026, Trump's numerous actions and statements have once again exceeded expectations, triggering significant market volatility, with the U.S. even experiencing a simultaneous sell-off in stocks, bonds, and the currency. After a period of relative calm following the U.S. reduction of "reciprocal tariffs" on multiple economies in August last year and the one-year suspension of Sino-U.S. tariffs in October, the situation has abruptly pulled everyone back to the "familiar feeling" of last April's "reciprocal tariffs." U.S. policy uncertainty has consequently risen again, and the volatility of U.S. stocks and bonds has also increased.
Trump's "modus operandi" of challenging the existing international order is the key source of discomfort for global markets and the root cause of asset volatility. However, beyond the methods, understanding the objectives and intentions behind all of Trump's policies is arguably more important. In the process of achieving these goals, some extreme measures cause severe volatility, while others may backfire. This approach of observing the methods while also understanding the purposes can help see the essence through the phenomena, comprehend the impact of these policies on the U.S. macroeconomy and markets, and also observe Trump's constraints. It must be clarified that the discussion herein focuses solely on macro-level intentions.
As of January 20th this year, Trump has been in office for exactly one year. From a macro perspective, the primary macro objectives of his policies since taking office can be essentially summarized in three words: revenue increase, cost reduction, and repatriation.
To achieve revenue increase, raising domestic taxes is not feasible as it contradicts Republican ideology; expanding debt is also unrealistic due to high financing costs and opposition from "fiscal hawks" within the Republican party. Therefore, the best method is to "seek externally," which is one intent behind brandishing the tariff "big stick" from the outset.
Currently, the effects appear quite significant. 1) Trade deficit: Calculated from April 2025 to the latest October 2025 data, the cumulative trade deficit was only $397.33 billion, a 24.6% decrease from the $527.06 billion during the same period in 2024. In Q2 and Q3 2025, the reduction in the U.S. trade deficit with China reached 48.3%. 2) Tariff revenue: The U.S. actual effective tariff rate is 11.1%, generating $287 billion in tariff revenue for full-year 2025. This sum conveniently became a funding source for the "Big Beautiful" Act's fiscal expenditures. Thus, achieving the effect of "spending others' money on one's own affairs," fiscal expansion occurred without a significant increase in debt growth or the deficit. In FY2025, the U.S. government deficit shrank from $1.83 trillion to $1.76 trillion, with the deficit ratio falling from 6.4% to 5.8%, while debt growth decreased from $2.21 trillion to $2.17 trillion.
However, the backlash from aggressive tariff policies is also evident. The financial market's "triple sell-off," retaliation from trade partners, fissures in ally relationships, the erosion of global trust in the dollar system, and domestic U.S. inflationary pressures are all clear costs—some quantifiable short-term, others with long-term impacts difficult to estimate. Nevertheless, the short-term costs remain somewhat controllable for now. 1) Inflation has not surged as feared. This is because tariff transmission is slow; the U.S. actual effective tariff rate calculated from tariff revenue is only 11.1%, not yet reaching the theoretical 15% rate based on tariff policies. Furthermore, the proportion of tariff costs borne by U.S. consumers is relatively low, recently fluctuating between 10-15%, with the remainder largely shared by exporters and importers, thus not preventing the Fed from initiating rate cuts. 2) Global "de-dollarization" has not been as intense as imagined, especially among European allies. U.S. Treasury data shows that as of November 2025, among major foreign holders of U.S. Treasuries, China, Ireland, and India continued to reduce holdings, but Japan, Belgium, the UK, etc., increased holdings. EPFR daily data indicates that European flows into U.S. Treasuries saw a significant outflow in April but subsequently resumed inflows. During the Greenland incident's market impact, U.S. equities saw noticeable outflows, but Treasuries did not. However, the situation clearly cannot withstand much more significant "disruption"; if systemically escalated further, impacts could spiral out of control, which is likely one reason for Trump's rapid TACO on the Greenland issue.
Inferring from the "revenue increase" objective, Trump also cannot afford to lose tariff income. If lost, not only would it prevent using these funds to stimulate domestic demand, but fiscal sustainability concerns would immediately be thrust into the market spotlight for scrutiny. Therefore, the Supreme Court's ruling on IEEPA presidential authority is particularly important. Polymarket data shows that as of January 24th this year, the market expects only a 31% probability of a Supreme Court ruling in Trump's favor, but only a 17% probability of a ruling requiring tariff revenue refunds. According to calculations, of the 13 percentage point increase in the tariff rate in 2025, the IEEPA clause contributed 6 ppt, and Section 232 contributed 7 ppt. If IEEPA-related tariff revenue were excluded (equivalent to reducing 2026 tariff revenue from $363 billion to $195.5 billion), the 2026 fiscal deficit ratio might expand from 6.4% to 7.0%. However, because this is due to reduced revenue, it would instead increase concerns about fiscal unsustainability.
If this outcome occurs, Trump would lose "face" but retain the tariff "substance." However, because tariff agreements include investment commitments from various countries, expectations for further fiscal stimulus beyond expectations would inevitably be affected.
Many current U.S. economic problems relate to high costs, such as high inflation and high interest rates, so many of Trump's policies aim to address this. The most typical is continuously pressuring the Fed to lower rates, from initially publicly urging Powell, to "stuffing the Fed" (nominating Milan in September 2025, who ultimately became a Fed Governor), "poaching" (suing Lisa Cook), and even directly suing Powell. Additionally, Trump attempted to require banks to cap credit card rates at 10% within a year, instructed institutional investors to avoid competing with ordinary families for housing and driving up prices, and directed the "GSEs" (Fannie Mae and Freddie Mac) to use $200 billion of their own funds to purchase mortgage-backed securities (MBS) (as of November 2025, the GSEs held only $141 billion in MBS), all with this purpose.
However, compared to revenue increase, these non-market measures have limited effectiveness in cost reduction. U.S. Treasury yields have remained high; as of FY2025, the interest cost on U.S. Treasury debt approached $1 trillion, accounting for 3.1% of GDP, even after the Fed's rate cut in September 2025. The core reason is that Trump attempts to use non-market administrative means to influence dispersed and intangible market forces, which is entirely different from tariff negotiations with dozens of economies.
The backlash from these non-market measures is also greater. For instance, the blatant trampling of Fed independence not only lacks broad support but can trigger market sell-offs of U.S. Treasuries, achieving the opposite effect; each time Treasury yields spike, Trump also TACOs again. Therefore, the upcoming Supreme Court rulings on whether Trump has the authority to remove Fed Governor Lisa Cook and the criminal investigation into Powell regarding the "Fed headquarters renovation project" are crucial for market sentiment. As of January 24th this year, Polymarket data shows only a 2% probability of Lisa Cook leaving the Fed before the end of February, and Powell has received collective support from major global central banks. Currently, the best and most effective approach appears to be working within the existing framework, influencing market expectations through the nomination of a new Fed Chair. Polymarket data shows that as of January 24th, the probability of Rieder being elected as the new Fed Chair is 60%, and Warsh's probability is 22%. Based on past statements, both candidates hold more dovish positions than Powell's "hinting at no rate cuts." When the market reacts to expectations of a温和鸽派 new Chair, it could achieve the goals of cost reduction and recovery in real estate and traditional demand.
Repatriating manufacturing and capital to the U.S. is Trump's third objective. To this end, Trump has at least several initiatives: 1) Attracting corporate investment in the U.S. through tax incentives, such as 100% accelerated depreciation (allowing full cost deduction in the first year) and domestic R&D expenditure deductions in the "Big Beautiful" Act. 2) Forcing foreign companies to invest in the U.S. through tariff threats, e.g., European pharmaceutical companies like Roche expanding U.S. investment to avoid high tariffs, Mexican auto parts company Nemak and industrial company Grupo Mexico evaluating shifting some capacity to the U.S., and even U.S. companies with diversified supply chains like General Motors and Tesla expanding U.S. factories in response to tariffs. 3) Requiring trade partners to commit to U.S. investment through tariff agreements; since May, agreements with major trade partners have secured nearly $5 trillion in cumulative investment in AI, energy, semiconductors, etc.
Currently, these measures have shown significant effects. 1) Manufacturing repatriation: Under the impact of "reciprocal tariffs," the U.S. manufacturing import ratio peaked at 13.3% in March 2025, then stabilized before accelerating its decline from August, falling to 8.0% by October, indicating rising domestic manufacturing share and importance, with repatriation effects gradually appearing. 2) Corporate investment: From a macro perspective, driven by equipment and intangibles, U.S. business fixed investment year-on-year growth rose from 0.9% in December 2024 to 3.9% in September 2025. Micro-level, S&P 500 capital expenditure YoY growth increased from 8.7% in September 2024 to 19.8% in September 2025; excluding the "Magnificent Seven," constituent capex YoY growth also rose from 2.9% to 7.4% over the same period.
However, uncertainty arises from Trump's continuous challenge to the existing international order, potentially triggering an intensifying, self-fulfilling "de-dollarization" trend. Foreign direct investment in the U.S.: The committed $5 trillion from various countries could provide incremental physical investment. If evenly distributed over the agreement period, $1 trillion could be released in 2026, equivalent to 3.2% of U.S. GDP. But whether due to the Supreme Court negating presidential authority under IEEPA, jeopardizing trade agreements, or "disorderly" tariffs raising concerns about investing in the U.S., this investment faces uncertainties in timing and scale. Financial market investment, especially in U.S. Treasuries: Whether due to punitive measures (e.g., Danish pension fund Akademiker Pension planning to divest its ~$100 million Treasury holdings, Swedish private pension Alecta also stating it began selling its Treasury holdings in batches from early 2025) or fears that Treasuries are no longer "safe," if leading to capital flight and de facto "de-dollarization," it would be "fatal" to the U.S. financial system and the dollar cycle allowing borrowing without penalty. But so far, this concern remains largely at the "narrative" level. Akademiker Pension's $100 million holdings are more symbolic than substantively impactful against the ~$39 trillion Treasury market. The de-dollarization narrative, rampant after April's reciprocal tariffs, has not widely materialized globally; total foreign holdings of U.S. Treasuries even hit a new high in November 2025, near $9.4 trillion (vs. $9.0 trillion in April). This issue is crucial and requires close monitoring; Treasury market turmoil is also a key reason for Trump's TACO, unable to withstand persistent disruption.
The impact of recent "chaos"? Primarily affects the timing and expectations of fiscal and monetary "double easing," key to driving the repair of the U.S. credit cycle.
In 2025, the U.S. stock market and macroeconomy were largely supported solely by tech, with fiscal policy not only not stimulating but even contracting at times, while traditional demand remained sluggish or weakened due to high rates. Thus, 2025 saw only AI's alpha, without fiscal or broader economic beta. Tech: Although perturbed short-term by DeepSeek, the U.S. AI trend continues. According to consensus estimates, full-year 2025 investment growth in the AI industry chain for leading U.S. listed companies may reach 63.6% (including data centers and supporting infrastructure, chip R&D, and model innovation).
Fiscal: FY2025 coincided with the transition between bipartisan administrations, requiring Continuing Resolutions to maintain spending; Musk's DOGE layoffs and cost-cutting early in the year even brought expectations of fiscal contraction. Although the "Big Beautiful" Act passed in July 2025, its tax cut effects will only materialize in 2026. Traditional demand: Still faces high cost pressures. 1) Household sector: The 30-year mortgage rate remained above the rental yield return from November 2024 to September 2025, reflected in existing home sales staying low for much of 2025. 2) Corporate sector: The effective interest rate on commercial and industrial loans remains higher than the return on investment for industries excluding information technology.
In 2026, fiscal and monetary "double easing" is expected to, alongside tech, achieve a scenario where traditional demand recovers and fiscal policy accelerates共振, pushing the U.S. credit cycle towards repair, even "overheating" under certain conditions—this is the basic assumption in the 2026 outlook. Indeed, since late 2025, cyclical sectors briefly outperformed tech, and small-caps (Russell 2000) outperformed large-caps, all stemming from this expectation.
The tech trend continues: Endogenous demand supports the ongoing AI trend. 1) Macro level: AI's effect on labor productivity is already evident, with non-farm business sector labor productivity rising 7.2%, faster than during the internet revolution. 2) Micro level: McKinsey's 2025 survey indicates AI applications can reduce costs by 9-11%, translating to annual savings of $300 billion in S&P 500 SG&A expenses, equivalent to 15 times OpenAI's annualized revenue.
Fiscal moving towards expansion: The "Big Beautiful" Act can provide $340 billion in primary deficit, accounting for over 1% of U.S. GDP. Driven by this, the U.S. fiscal impulse is expected to turn from -0.1% in FY2025 to +0.7% in FY2026. Considering potential increments from foreign investment in the U.S., the positive shift in fiscal impulse could be larger, being one source of potential "overheating."
Monetary policy still has room for easing: The current U.S. natural rate is around 1.1%, while the real rate is near 1.8%, implying a need for about 3 rate cuts to address the 70bp gap, but normally not many more are needed. Therefore, additional easing expectations still require a more dovish new Fed Chair to guide market expectations. Regarding inflation, U.S. inflation is expected to peak around Q2, with both headline and core CPI YoY at 3.0%, not posing a major obstacle to rate cuts.
However, the series of policy "chaos" at the beginning of 2026 has delayed market expectations for fiscal and monetary "double easing" (short-term focus on Greenland negotiations, Fed Chair appointment also repeatedly delayed due to several lawsuits), which is the macro transmission path. Nevertheless, it hasn't reached the point of completely reversing the overall credit cycle direction, so it won't lead to the other extreme of outright pessimism, especially since the "Big Beautiful" Act provides a base of 1% deficit expansion, and the new Fed Chair appointment will still influence market rate cut expectations. There's also the practical pressure of midterm elections at year-end; as of January 24th, Polymarket data shows a 79% probability of Democrats winning the House. Of course, close attention must be paid to developments, preparing for the worst-case scenario where fiscal and monetary policy completely miss the window for impact, or even if implemented, are counteracted by market forces.
It must be noted that even in the worst-case scenario, tech investment is independent of the above policy variables. This is because funding for U.S. AI investment comes almost entirely from the private sector, with private capital规模($552 billion) exceeding government funding ($11 billion) by 50 times. This means it完全不依赖 Trump's tariff revenue or fiscal progress, depending more on its own business logic and returns.
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