Macro Overview

Over the past year, despite the disruptive impact from President Trump’s tariff announcements and related rhetoric, global investment markets have continued to trend positively. Asian equities have been among the strongest regional performers. While the initial tariff announcement temporarily heightened market volatility, a weaker U.S. dollar, strong momentum in AI-related investments, and rising expectations for Federal Reserve rate cuts collectively supported robust performance across major Asian markets—including China, Hong Kong, South Korea, and Taiwan.

Looking ahead to 2026, we believe AI and technology stocks, led by the US, will remain the market’s focal point. On one hand, increasing investor scrutiny over valuation levels and the sustainability of massive capital expenditures (CapEx) means future earnings performance of these companies will remain under close watch. On the other hand, whether AI technology achieves further breakthroughs in everyday human life will be key to the future trajectory of related stock sectors, while also influencing overall market sentiment.

In contrast, China’s technology and AI-related sectors may offer clearer investment visibility next year. Following the formal approval of the 15th Five-Year Plan framework, the country’s economic policy direction has become more transparent. The central government’s emphasis on “technological self-reliance and self-strengthening” confirms that technology autonomy will serve as a structural engine for long-term economic growth. These policy priorities also provide a solid foundation for China’s AI and advanced technology sectors to continue narrowing the gap with U.S. counterparts.

Beyond AI, traditional macroeconomic drivers will also influence investment sentiment in 2026. Market expectations regarding the timing and magnitude of Federal Reserve rate cuts have been a dominant force throughout this year. At the time of writing, consensus expectations point to the potential appointment of a more dovish Fed chair next year, which may help maintain accommodative liquidity conditions. Meanwhile, with the U.S. government resuming operations and restarting the release of economic data, investors will gain greater clarity in assessing the economic outlook and the likelihood of rate cuts.

As the U.S. reached agreements and preserved communication channels with certain trading partners this year—together with the agreement between President Xi Jinping and President Donald Trump at the Busan summit to suspend selected restrictive trade measures for one year—market concerns over U.S. tariff policy and China–U.S. relations have eased substantially. With U.S. midterm elections scheduled for November next year, the Trump administration is also expected to introduce pro-growth policies in the first half of 2026, which may provide additional support to market sentiment.

Overall, we remain constructive on the outlook for risk assets in 2026, though we expect market volatility to rise. Apart from elevated valuations across risk assets, the rapid expansion of derivative products in recent years may further amplify short-term market swings. Against this backdrop, while we continue to identify high-quality investment opportunities, we will maintain strict discipline in risk management to preserve capital stability and pursue sustainable growth, “advancing with resilience”.

To learn more, read the full report now: Value Partners | 2026 Market Outlook

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