Core Viewpoint - The current transition between old and new orders is in a "chaotic period," suggesting a need for a "global barbell strategy" for asset allocation, focusing on Chinese assets in the second half of the year [3][10][14]. Group 1: Overview of the Current Situation - The core contradiction in China's macroeconomic environment remains the debt cycle, with the country having passed the peak of the current debt cycle and entering a contraction phase [3][27]. - The transition from "passive leverage" to "de-leveraging" is ongoing, characterized by a decrease in total debt service relative to GDP while total debt increases [3][37]. Group 2: Historical Context and Credit Pulse Conditions - Historical analysis indicates that conditions triggering credit pulses during debt contraction periods include a significant easing of monetary policy [4][38]. - The relationship between nominal GDP growth and policy interest rates serves as a leading indicator for economic trends, with a need for sustained monetary easing to alleviate private sector debt burdens [5][39]. Group 3: Investment Strategy for the Second Half - The focus for Chinese assets should be on maximizing "win rates," with fixed income expected to outperform equities and commodities during the debt contraction phase [6][61]. - Strategic asset allocation should favor high dividend and high-value factors while reducing exposure to high-growth factors in A-shares [6][73]. Group 4: Risk and Pricing Assessment - The overall pricing of Chinese assets appears reasonable, with the current equity risk premium reflecting the structural transformation of the economy [5][48]. - The yield curve is expected to steepen, with short-term debt offering better risk-adjusted returns compared to long-term debt [5][52][53].

Core Viewpoint - The article discusses the transition period between the old and new global order, emphasizing the need for a "global barbell strategy" for asset allocation in response to the current chaotic environment. It highlights that the key to success in the second half of 2025 lies in understanding the win rates for Chinese assets and the odds for U.S. assets [3][11]. Group 1: 2025H1 Overseas Asset Market Review - The narrative of American exceptionalism is fading, challenged by three main factors: the emergence of Deepseek affecting U.S.-China tech narratives, concerns over U.S. fiscal tightening led by Musk's Doge initiative, and the introduction of reciprocal tariffs increasing uncertainty around U.S. dollar hegemony [3][12]. - Non-U.S. assets outperformed U.S. assets in the first half of 2025, indicating a shift in market dynamics [12]. Group 2: Win Rates - Global growth is expected to slow down in the second half of 2025, with the growth momentum between the U.S. and non-U.S. regions likely to converge [15]. - The introduction of tariffs and the subsequent easing of these measures have led to a shift in market expectations regarding U.S. economic performance, with potential recession risks still looming [19][44]. Group 3: Odds - U.S. assets are currently overvalued compared to non-U.S. assets, indicating asymmetric risks that investors should be cautious of [5][45]. - The article warns that the pricing of U.S. assets does not adequately reflect the risks of a potential recession, suggesting that the market is underestimating the structural risks associated with U.S. economic policies [46][94]. Group 4: Outlook for 2025H2 - The global asset allocation strategy should continue to focus on the "global barbell strategy," which balances low-risk assets with high-risk, high-reward investments [72][75]. - The article identifies three core contradictions driving the new investment paradigm: rising anti-globalization, debt cycle misalignment, and the accelerating trend of AI industries [9][72]. - Specific asset classes recommended include Chinese government bonds, gold, and equities from emerging markets, particularly in Southeast Asia, which are expected to benefit from the ongoing global economic shifts [88][104].

Core Viewpoint - The article discusses a significant generational economic shift characterized by debt accumulation, social division, geopolitical tensions, and the potential collapse of the monetary system, suggesting that this is not just another economic recession but a transformative crisis that could reshape society [3]. Debt Cycle and Unsustainable Growth - Low debt costs, often due to low interest rates, lead borrowers to become complacent, resulting in increased leverage that becomes unsustainable as interest rates rise [5]. - The feedback loop created by debt-driven spending and growth can lead to asset price inflation, creating a false sense of security that ultimately results in a painful deleveraging process when debt repayment becomes burdensome [5][6]. - Central banks typically lower interest rates to stimulate borrowing and consumption, but this tool loses effectiveness when rates approach zero, leading to reliance on quantitative easing, which can distort price discovery and exacerbate inequality [6][7]. Internal Fractures: Social and Political Divisions - Historical patterns show that social disintegration often follows a buildup of tensions among various societal groups, leading to political dysfunction and economic inequality [9]. - Trust in institutions and leaders is crucial for societal cohesion; when this trust erodes, it can lead to a breakdown of the social contract and increased polarization [10][11]. - The rise of populism and extreme political rhetoric can hinder effective governance, making it difficult to address pressing issues like debt and education [10][11]. Geopolitical Deconstruction and Cold War 2.0 - The article highlights a strategic decoupling in global relations, particularly between the West and China, leading to a fragmented world order where nations prioritize security over efficiency in supply chains [13][14]. - Competition for technological supremacy and control over critical resources is intensifying, with countries increasingly seeking to reduce dependence on adversaries [14][15]. - The erosion of trust in the global financial system, particularly regarding the U.S. dollar, is prompting nations to explore alternative currencies and payment systems [17][18]. Currency Order Cracks - The current monetary system, heavily reliant on the U.S. dollar, is facing challenges due to persistent fiscal deficits and rising debt levels, leading to a loss of confidence in its stability [18][19]. - Countries are increasingly seeking to diversify away from dollar dependence, engaging in bilateral trade agreements and exploring digital currencies [20][21]. - The transition away from a dollar-centric system may not lead to immediate collapse but indicates a shift towards increased volatility and uncertainty in global finance [21]. Next Phase: Pain or Restructuring - The article emphasizes the importance of recognizing risks and opportunities in a volatile environment, advocating for a balanced approach to resource allocation [22][24]. - Diversification across asset classes, countries, and economic conditions is crucial for managing risk and seizing opportunities during periods of upheaval [24][25]. - Successful navigation of these challenges requires a thoughtful, adaptable strategy that prepares for multiple outcomes rather than relying on a single perspective [25][26].

Core Viewpoint - The global wealth has been declining, with a 2.4% drop in total private net wealth and a 3.6% decrease in per capita wealth, equating to a loss of approximately $3,200 per person [1][2] Group 1: Global Economic Context - The debt-driven development model established post-World War II is no longer sustainable, leading to a universal wealth shrinkage across nations [1][2] - Global public debt is projected to exceed $102 trillion in 2024, with the U.S. accounting for one-third of this total [1][3] Group 2: U.S. Debt Policy - The recent passage of the "Great American Rescue Plan" will increase U.S. debt by $3.4 trillion, indicating a refusal by U.S. elites to address the debt issue responsibly [2][3] - The U.S. is currently in a deleveraging phase, while other countries are opting for different paths, such as reducing debt levels [4][5] Group 3: Debt Cycle Analysis - The debt cycle consists of five stages, with the U.S. currently in the fourth stage of deleveraging, while continuing to expand its debt [3][6] - Historical debt crises have shown that high debt levels can lead to significant economic repercussions, particularly for the U.S., which is the largest debtor nation [6][7] Group 4: Dollar Depreciation - The U.S. dollar has depreciated by 10% this year, with potential further declines of up to 50% anticipated due to both active and passive factors [7][8] - Historical instances of dollar depreciation have often preceded significant economic crises, suggesting that the current situation may lead to substantial market impacts [8][9] Group 5: Investment Strategies - Investors are advised to reduce exposure to dollar-denominated assets and consider reallocating funds into safe-haven assets such as commodities and high-dividend stocks [9][10] - The current market trend indicates a strong preference for high-dividend bank stocks, reflecting a shift towards risk mitigation strategies [10]

Core Viewpoint - The article discusses the insights from Ray Dalio's new book "Why Nations Fail: Big Cycles," which explores the underlying forces that control national economic destinies and the implications of debt cycles on global power dynamics [1][21]. Group 1: Big Debt Cycle and Its Evolution - The big debt cycle refers to the accumulation of debt assets and liabilities over a long period, leading to uncontrollable debt levels and potential national bankruptcy [3][4]. - The cycle typically consists of five stages: 1. **Sound Money Stage**: Low net debt levels and stable currency, allowing for productive debt growth [4]. 2. **Debt Bubble Stage**: Abundant and cheap funding drives economic expansion, leading to rising demand and prices [4]. 3. **Peak Stage**: The bubble bursts, causing simultaneous contraction in debt, credit, and the economy [4]. 4. **Deleveraging Stage**: Painful adjustments align debt levels with income, returning to sustainability [4]. 5. **Debt Crisis Dissipation**: A new balance is achieved, initiating a new cycle [4]. - Countries like the U.S. and others are currently in the late stages of the debt cycle, with a 65% chance of significant debt restructuring within five years and an 80% chance within ten years [3][4]. Group 2: Five Forces and Internal-External Order - The big debt cycle is one of five interconnected forces that drive the transition from an "old order" to a "new order," including domestic political harmony and conflict, international geopolitical dynamics, natural forces, and technological breakthroughs [8][9]. - Internal order is crucial as governments may implement austerity measures, tax increases, or currency devaluation to manage debt, potentially leading to political crises and social unrest [9]. - External order, particularly the stability of the global monetary system and geopolitical relationships, significantly impacts national power. The U.S. has historically benefited from its reserve currency status, but this is threatened by rising debt levels and geopolitical tensions [10][11]. Group 3: Impact of Technological Revolution - Technological advancements have historically improved living standards and military capabilities but can also lead to significant internal conflicts if they rely on unsustainable credit expansion [12][13]. - The competition between the U.S. and China in technology, particularly in areas like artificial intelligence and semiconductor production, will significantly influence their economic and military strengths [14][15]. - The next five years are expected to see substantial technological progress, with the potential for revolutionary changes driven by creative and practical applications of new technologies [14]. Group 4: Future of the Big Cycle - The current big cycle, which began in 1945, is nearing its end, suggesting imminent significant changes in global order, including potential conflicts and transformations in monetary and internal orders [10][11][16]. - The article emphasizes the importance of cooperation among nations to address challenges and seize opportunities, suggesting that the outcomes will depend on how societies choose to interact [15][18].

Core Viewpoint - The article highlights a concerning global trend of wealth stagnation and decline, with a significant drop in private net wealth and per capita wealth across various countries, including developed and emerging economies [1][2]. Group 1: Global Wealth Decline - Global private net wealth has decreased by 2.4% in recent years, with per capita wealth shrinking by 3.6%, equating to a loss of approximately $3,200 per person [1]. - Wealth erosion is not limited to developed nations like the US and Europe but also affects emerging markets, including BRICS and ASEAN countries [1]. Group 2: Debt-Fueled Growth Model - The root cause of this wealth decline is attributed to the unsustainable debt-driven growth model that has been in place since World War II, particularly under US leadership [1]. - The model relies on printing money to issue debt, which in turn fuels consumption and GDP growth, but has reached its limits as global public debt is projected to exceed $102 trillion in 2024, with the US accounting for one-third of this total [1][2]. Group 3: US Debt Expansion - The recent passage of the "Great America Act," which allows for an additional $3.4 trillion in debt, indicates a refusal by US elites to address the debt crisis responsibly [2]. - This decision to continue expanding debt is viewed as a dangerous choice for the global economy, as it could exacerbate financial instability [2]. Group 4: Debt Cycle Analysis - The article discusses the concept of debt cycles, as outlined by Ray Dalio, which consists of five stages spanning approximately 80 years [3][4]. - The current phase, characterized as the "deleveraging phase," sees different countries adopting varied approaches, with some, like the US, opting to continue accumulating debt rather than reducing it [4][6]. Group 5: Implications of US Debt Practices - The US's deviation from normal debt cycle behavior poses significant risks, particularly in terms of potential dollar devaluation, which has already seen a 10% decline this year [6][7]. - Historical patterns indicate that major dollar devaluations have occurred during times of economic crisis, and the current situation combines both proactive and reactive factors leading to a potential unprecedented devaluation of up to 50% [7][8]. Group 6: Investment Strategies - The anticipated dollar devaluation could lead to substantial declines in dollar-denominated assets, prompting a shift in investment strategies towards safer assets such as commodities and high-dividend stocks [8][9]. - The current market trend shows a preference for bank stocks due to their high dividends, reflecting a broader demand for risk-averse investments [9].

Group 1: Macro Economic Insights - The narrative of a weakening dollar has become a common preference among risk-averse investors since Trump's administration, as significant depreciation of the dollar often leads to revaluation of non-dollar assets[1] - The macroeconomic narrative is a key driver of market direction, with the potential loss of reserve currency status being a significant concern, particularly due to the large debt burden of the U.S.[2] - Historical transitions of reserve currencies have presented substantial asset revaluation opportunities, with past examples showing significant depreciation of the current reserve currency relative to successors and precious metals[2] Group 2: U.S. Debt Analysis - The U.S. government debt burden has increased by 14.6% from 2019 to 2023, while household leverage has decreased by 3.1% and non-financial corporate leverage has decreased by 8.6%[3] - The U.S. government debt level was over 100% before the global pandemic, but concerns were minimal; post-pandemic, the debt has risen significantly, reflecting a societal "leverage transfer"[3] - The pressure from maturing U.S. government bonds is expected to peak in Q1 2027, with an estimated maturity amount of $9 to $10 trillion, compounded by a potential fiscal deficit stabilizing above 5%[5] Group 3: Future Projections - The next two years are critical for the U.S. debt cycle transition, influencing fiscal, monetary policies, and the dollar index[6] - Historical patterns indicate that the current dollar depreciation cycle may last until the end of 2027, with a potential initial rapid depreciation followed by a prolonged period of volatility[7] - Risks include extreme U.S. trade policies leading to faster and larger-than-expected dollar depreciation, which could exacerbate global economic slowdowns[7]

Core Viewpoint - The article emphasizes the need for long-term investors to deeply interpret the reshaping of the global order and assess the cost-effectiveness of various assets, particularly in light of the increasing risks associated with U.S. recession and the implications of new investment paradigms [3][4][9]. Group 1: Introduction and Key Variables - The beginning of the year has seen two critical variables (Deepseek and reciprocal tariffs) that reinforce the underlying logic of a new investment paradigm characterized by increasing de-globalization, trends in AI industries, and debt cycles [3][12]. - The global risk premium has risen, potentially amplifying asymmetric pricing risks, particularly regarding the underpricing of recession risks in major asset classes [3][4]. Group 2: U.S. Recession Trading - Historical data shows that U.S. recession trading often begins 1-6 months before the National Bureau of Economic Research (NBER) officially declares a recession [4][42]. - Typical characteristics during U.S. recession trading include declines in U.S. stocks and industrial metals, falling 10-year Treasury yields, widening credit spreads, and defensive stocks outperforming cyclical stocks [4][47]. Group 3: Volatility During Recession Trading - During past U.S. recession trading phases, asset volatility has increased, with risk assets experiencing greater volatility than safe-haven assets [4][63]. - The volatility amplification factors for various assets have been ranked, with Nasdaq showing the highest, followed by the Indian SENSEX30 and Hang Seng Technology [5][70]. Group 4: All-Weather Strategy Model - The article discusses how to adjust the all-weather strategy model to correct the underestimation of U.S. recession risks in asset pricing [4][70]. - The model suggests increasing the allocation to Chinese convertible bonds and A-share dividends while reducing exposure to Nasdaq, Indian SENSEX30, and Hang Seng Technology based on their respective volatility amplification factors [5][70]. Group 5: Asymmetric Pricing Risks - The current global investment landscape shows a significant underestimation of U.S. recession risks, which presents an opportunity for asymmetric trading strategies that favor high potential gains with limited losses [4][24]. - The article highlights the importance of adjusting asset allocations to account for these asymmetric risks, particularly in light of the evolving global economic landscape [4][70].

Core Viewpoint - The article emphasizes the need for long-term investors to deeply interpret the reshaping of the global order and assess the cost-effectiveness of various assets, particularly in light of the increasing risks associated with U.S. recession and the implications of new investment paradigms [3][10]. Group 1: Introduction - The article discusses two key variables at the beginning of the year: Deepseek and equivalent tariffs, which reinforce the underlying logic of a new investment paradigm characterized by increasing de-globalization, trends in AI industries, and debt cycles [3][10]. - It suggests that the global risk premium has risen, potentially amplifying asymmetric pricing risks, particularly regarding the underpricing of recession risks in major asset classes [3][10]. Group 2: U.S. Recession Trading - Historical data indicates that U.S. recession trading often begins 1-6 months before the National Bureau of Economic Research (NBER) officially declares a recession [4][47]. - Typical characteristics during U.S. recession trading include declines in U.S. stocks and industrial metals, falling 10-year Treasury yields, widening credit spreads, and defensive stocks outperforming cyclical stocks [4][47]. Group 3: Volatility During Recession Trading - The article notes that during past U.S. recession trading phases, asset volatility has generally increased, with risk assets experiencing greater volatility than safe-haven assets [5][65]. - Specific examples include the Nasdaq and Hang Seng Index showing higher volatility compared to gold and U.S. Treasuries during recession periods [5][65]. Group 4: All-Weather Strategy Model - The article proposes an all-weather strategy model to adjust for the underestimation of U.S. recession risks, focusing on the asymmetric pricing risks present in current asset allocations [6][73]. - It ranks various assets based on their volatility amplification factors during past recession trading periods, with Nasdaq, Indian SENSEX30, and Hang Seng Technology leading the list [6][73]. - The model suggests adjusting asset weights based on these factors, increasing allocations to underweighted assets like Chinese convertible bonds and A-share dividends while reducing exposure to overvalued assets like Nasdaq and Indian SENSEX30 [6][73].

Core Viewpoint - Long-term investors need to deeply interpret the direction of the reshaping world order and weigh the cost-effectiveness of various assets, as two key variables (Deepseek and reciprocal tariffs) have further strengthened the underlying logic of a new investment paradigm [1] Group 1: U.S. Recession Trading - The initiation of recession trading often leads the actual declaration of recession by the NBER by an average of 1-6 months [1] - Typical characteristics of U.S. recession trading include declines in U.S. stocks and industrial metals, a decrease in 10Y U.S. Treasury yields, widening U.S. credit spreads, and defensive stocks outperforming cyclical stocks [1] Group 2: Asset Volatility During Recession Trading - Historical data shows that asset volatility increases during U.S. recession trading phases, with risk assets experiencing a greater increase in volatility compared to safe-haven assets [2] - Specifically, the volatility amplification factor for risk assets (e.g., Nasdaq, Hang Seng Index) is greater than that for safe-haven assets (e.g., gold, U.S. Treasuries, Chinese bonds, A-share dividends) [2] Group 3: All-Weather Strategy Model - Investors need to focus on the asymmetric pricing risks in their portfolios, particularly the underestimation of U.S. recession risks [3] - The ranking of volatility amplification factors for various assets during past U.S. recession trading periods is as follows: Nasdaq > India SENSEX30 > Hang Seng Tech > U.S. Treasuries > Gold > Chinese bonds > Bitcoin > A-share dividends [3] - Adjustments to asset allocation based on corrected volatility factors indicate an increase in weight for Chinese convertible bonds and A-share dividends, while reducing weight for Nasdaq, India SENSEX30, and Hang Seng Tech [3]