Mid-2026 Progress Report: Majority of "Ten Predictions" for the Year Have Been Validated

With the midpoint of 2026 approaching, a review of the "Ten Predictions" made at the end of last year shows that the majority have been validated, while some remain to be observed in the second half of the year.

Regarding the A-share and Hong Kong stock markets, the judgment was that this year would continue the slow-bull, long-bull trend, with significantly increased investment opportunities and enhanced investor returns. A spring rally was anticipated for the first quarter. However, the sudden US-Israel attack on Iran on February 28th, which triggered the Middle East war and the blockade of the Strait of Hormuz—a critical global oil chokepoint—led to a sharp rise in international oil prices. This sparked investor concerns about global inflation and fears that a prolonged conflict could impact economic recovery, forcing the Federal Reserve to delay its interest rate cut cycle. Consequently, the A-share and Hong Kong markets experienced a significant decline in March, with the Shanghai Composite Index approaching the 3800-point level. When many investors questioned whether the Middle East war would end the bull market, the stance was clear: during a live broadcast in Beijing with Professor Liu Jipeng, the view was expressed that "the battle to defend the 4000-point level is a bull market pullback, not the arrival of a bear market." In retrospect, providing encouragement when market confidence was at its weakest in March proved timely, as the market gradually recovered from the adjustment. While the Middle East war disrupted the rhythm of the spring rally, the market has now steadily returned to its upward trajectory.

Prior to the May Day holiday, many inquired about holding stocks or cash over the break. The view was clear. Domestically, former US President Trump faces significant anti-war pressure, particularly due to higher inflation expectations driven by rising oil prices, compelling him to seek a dignified exit from the conflict. However, Iran, recognizing Trump's vulnerability, was unwilling to concede easily, finding delay advantageous. Trump's visit to China in mid-May, his first in eight years, occurred during critical Middle East peace negotiations. His need for China's support in these talks provided a favorable position in Sino-US discussions and potentially signaled a thaw in bilateral relations. Last year's tariff war initiated by Trump strained relations, but a strategy of reciprocal measures and using confrontation to promote negotiation ultimately pressured him to rescind the additional tariffs, largely restoring the pre-trade war status quo. Notably, a US Supreme Court ruling declaring Trump's tariff hikes illegal thwarted his scheme to curb Chinese exports through a tariff war. Overall, Trump's visit is viewed as beneficial for China's economic growth and diplomacy, constituting a significant positive for the capital markets. Therefore, before departing for the Berkshire Hathaway Annual Meeting prior to the May Day holiday, it was suggested that holding quality stocks or funds with conviction over the holiday was advisable, with a high probability of a "red May" rally following the break. Post-holiday, the market indeed advanced consecutively, with the Shanghai Composite Index breaking through the 4200-point level this week to reach an 11-year high, further confirming the slow-bull, long-bull trend.

This slow-bull, long-bull market was established following the introduction of a comprehensive package of pro-growth policies on September 24, 2024. An increasing number of market participants now believe this trend will persist for years rather than being a short-term phenomenon. Profound logic underpins this view. Firstly, pro-growth economic policies are gradually being implemented and taking effect. Key economic data is expected to improve progressively this year, with consumption growth rebounding and prices gradually rising—CPI and PPI have both turned positive, which are encouraging signals. Secondly, a significant shift of household savings into the capital markets is accelerating. Historically, household savings flowed into the property market. However, China's real estate sector continues its adjustment; only core properties in first-tier cities show signs of stabilizing or rebounding with some recovery in transaction volume, while the nationwide market remains in a corrective phase. Household savings now require a new outlet for preservation and appreciation, and that outlet is the capital markets. Particularly after a year and a half of a slow-bull market, the performance of equity funds has markedly improved compared to previous years. Funds focused on sectors like technology and commodities in 2025 saw substantial gains, attracting a major shift of household savings. China's household deposits have surpassed the 165 trillion yuan mark, with 50 trillion yuan in term deposits maturing this year alone. A significant portion of these funds is likely to enter the market through equity fund purchases. The scale of equity fund sales has notably increased this year, validating the judgment in the 2026 predictions, with several new funds achieving sales exceeding 50 billion yuan. The popularity of passive funds like index funds and ETFs has made them a crucial channel for the transfer of household savings to the capital markets, providing a continuous source of incremental funds for the slow-bull, long-bull market.

On the policy front, the People's Bank of China is expected to maintain supportive monetary policies, preserving a low-interest-rate, high-liquidity environment conducive to sustained strength in capital markets. Fiscal policy will also play a role, employing various measures to stimulate investment and boost consumption. The gradual implementation of these measures should help increase economic growth rates and bolster investor confidence.

Within the capital markets, technology stocks remain a key investment theme this year, but more sectors are expected to experience rotational strength. This includes "HALO assets"—heavy-asset, low-volatility industries such as renewable energy (wind, solar, storage), non-ferrous metals (including rare earths), precious metals, coal, and oil & gas. These sectors are not only irreplaceable in the AI era but form its foundational infrastructure. Technology stocks represent the sectors benefiting from the AI era, including six major tracks: semiconductors, computing power & algorithms, humanoid robots, commercial aerospace, solid-state batteries, and biopharmaceuticals. These were repeatedly highlighted last year as areas likely to produce ten-bagger stocks and remain focal points for future attention. "Technology + Heavy Assets" constitute the two primary investment themes of the slow-bull, long-bull market.

Regarding exchange rates, the expectation for continued Renminbi appreciation has been validated, with the RMB/USD rate strengthening from a low of 7.4 to 6.8. Periods of RMB appreciation typically attract increased foreign capital inflows into RMB-denominated assets, making foreign investment inflows into A-shares and Hong Kong stocks more pronounced. Recent exchanges with international financial institutions like Bloomberg and Morgan Stanley on Wall Street have revealed a noticeable increase in foreign interest in Chinese assets.

Concerning precious metals, a bullish stance on gold and silver has been maintained for several years, driven by the logic of global geopolitical instability, the soaring US government debt, and growing skepticism towards the US dollar's credibility. Central banks, large investment institutions, and retail investors are increasingly allocating to assets like gold and silver for preservation and appreciation, partially substituting for the US dollar. When the international gold price was around $2000 per ounce years ago, it was posited that breaching $5000 or even $10,000 per ounce was merely a matter of time. Having now surpassed the $5000 mark, this view has been preliminarily validated. Long-term, as US government debt continues to climb towards $40 trillion, with annual bond interest payments alone exceeding $1.1 trillion (accounting for 20% of fiscal revenue), increased debt issuance heightens market skepticism about US debt credibility. The US 10-year Treasury yield once rose to 4.5%, challenging the textbook assumption of it being a risk-free rate; a 4.5% yield incorporates a default risk premium rather than representing a purely risk-free return. This is a key reason for the long-term upward trend in international gold prices. At the 2025 Berkshire Hathaway Annual Meeting, Warren Buffett explicitly stated his greatest concern was US fiscal policy, warning that if the debt burden remains unchecked, the US dollar—the "green piece of paper"—could eventually become worthless. This caution from the investment sage warrants attention. Allocating to gold-related assets and diversifying portfolios (e.g., increasing RMB asset exposure) has become a strategy for many international investment institutions.

The Federal Reserve is expected to continue its interest rate cut cycle this year. However, due to the Middle East war pushing up oil prices and inflation expectations, the timing of cuts may be delayed until after September. Current Fed Chair Jerome Powell's term ended on May 15th, though he remains a Board member. Trump's newly nominated Fed Chair, Kevin Warsh, is set to take office and is likely to employ a combination of "balance sheet reduction + interest rate cuts." While some worry about a potential Fed pivot towards rate hikes, this is considered highly improbable. The Fed remains in a cutting cycle, albeit with a delayed pace. Against the backdrop of expanding US dollar supply and ongoing de-dollarization trends, the US Dollar Index is expected to continue its long-term decline, a trend partially validated over the past year.

The most significant current market divergence concerns whether US stocks will peak and decline this year, a question requiring second-half validation. However, the elevated valuation bubble in US stocks is an undeniable fact. Driven by the AI tech revolution, massive capital has flooded into the "Magnificent Seven" US tech stocks, accounting for over 90% of the gains in this bull market. Views on US AI technology are sharply divided, with bears extremely pessimistic and bulls highly optimistic. For instance, Jim Rogers, during a dialogue last year, expressed extreme bearishness, believing the US AI tech bubble could burst at any moment. He had liquidated all US stock holdings to shift into A-shares and Hong Kong stocks, even suggesting the US market might experience the worst decline in his lifetime. At this year's Berkshire Hathaway Annual Meeting, Warren Buffett explicitly stated that US stock valuations were too high, with no attractive assets currently available. Over the past 14 quarters, Berkshire Hathaway has consistently reduced its US stock holdings. Its cash holdings have soared to over $390 billion, primarily allocated to cash-like assets such as US short-term Treasuries, while its stock portfolio has decreased to around $270 billion, representing less than 40% of its holdings. This reflects Buffett's consistent cautious style; he has not felt pressured by successive US market highs but instead calmly addressed the meeting.

This year marks the eighth time attending the Berkshire Hathaway Annual Meeting in Omaha. Buffett delivered opening remarks and, during an intermission, participated in a roughly 10-minute interview with the moderator, offering incisive insights. A simple retirement ceremony was held at the meeting for Buffett and the late Charlie Munger, featuring commemorative jerseys marking Buffett's 60 years and Munger's 45 years with the company, honoring the legendary partnership's lifelong contributions. They achieved the investment marvel of a 60,000-fold return over 61 years—an unparalleled record, likely never to be surpassed. While Greg Abel possesses strong investment capabilities, a significant distinction remains between him and Buffett. When answering investor questions, Abel primarily focuses on specific industry and company analyses, seldom elevating the discussion to the level of investment philosophy. In contrast, Buffett's 20-minute speech was replete with memorable quotes. For example, he described the current US stock market as akin to "a church with a casino attached," where value investors reside in the church and speculators in the casino. Because the casino is more alluring, an increasing number are moving from the church to speculate in the casino. This encapsulates the current state of US stocks. Buffett adheres to traditional investment principles, avoiding bubble stocks, seeking stable dividends, and maintaining significant holdings in companies like American Express, Apple, Bank of America, Coca-Cola, and Moody's—eschewing the chase for high-flying AI tech stocks while continuously reducing exposure and awaiting a market peak and subsequent decline. When asked by the moderator when he might consider buying US stocks again, he humorously replied, "When people stop answering their phones, then I might start thinking about it." Buffett's strategy involves progressively reducing risk exposure during bull markets to avoid the tech bubble burst, waiting for a market crash to deploy capital. It is this composed mindset and refusal to chase trends that have cemented his status as an investment legend. Buffett's short-term performance may not appear exceptional, with an annualized return of 19.9%, particularly underperforming the S&P 500 significantly in recent years. However, over the long term, his 61-year track record demonstrates the power of compound growth—a 60,000-fold return. Consider how many short-term, trend-chasing investors survive long-term to achieve such a result? This outcome itself validates the correctness of Buffett's investment philosophy, a point worthy of deep reflection.