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]

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 underestimation of U.S. recession risks in global asset pricing [3][20][46]. Group 1: Introduction - The beginning of the year has seen two key variables (Deepseek and equivalent tariffs) that reinforce the underlying logic of a new investment paradigm, characterized by increasing de-globalization, trends in AI industries, and debt cycles [3][10]. - The global risk premium has risen, potentially amplifying asymmetric pricing risks, with current global risk assets having largely recovered to levels prior to the imposition of equivalent tariffs [3][20]. 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][47]. - Typical characteristics during U.S. recession trading include declines in U.S. stocks and industrial metals, falling 10-year Treasury yields, widening U.S. 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 [5][65]. - The volatility amplification factors for risk assets (e.g., Nasdaq, Hang Seng Index) are higher than those for safe-haven assets (e.g., gold, U.S. Treasuries) [5][65]. 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 [6][73]. - The model suggests that the risk parity principle should be applied based on the adjusted volatility of various assets, leading to changes in asset allocation [6][73]. - The revised model indicates an increase in allocation for Chinese convertible bonds and A-share dividends, while reducing allocations for Nasdaq and Indian SENSEX30 [6][73]. Group 5: Asymmetric Pricing Risks - The current global investment landscape shows a significant underpricing of U.S. recession risks, which presents an opportunity for asymmetric trading strategies [20][46]. - The article highlights the importance of adjusting asset allocations to account for the potential impact of U.S. recession risks on various asset classes [20][46].

Group 1 - The core viewpoint emphasizes the need for global asset allocation strategies centered around three main factors: de-globalization, debt cycles, and AI industry trends [1][2] - The proposed investment strategy is a "global barbell strategy," which includes stable assets on one end and high-yield, high-volatility assets on the other [1][2] - The current global economic uncertainty necessitates a focus on asymmetric pricing opportunities within various asset classes [2][3] Group 2 - The analysis indicates that the U.S. trade policy is unlikely to reverse the three underlying logics of the new investment paradigm, potentially increasing global political and economic uncertainty [2] - The recommendation includes a focus on defensive sectors in response to potential U.S. economic recession risks, alongside the necessity of gold as a sovereign credit asset [3] - The domestic market is currently in a debt contraction phase, transitioning from "passive leverage" to "active deleveraging," suggesting that domestic interest rate bonds hold long-term investment value [4] Group 3 - The "barbell strategy" is also applicable to strategic asset allocation in China, with a continued positive outlook on interest rate bonds and a focus on dividend assets and AI technology [4] - The AI sector, particularly represented by the "Tech Seven Sisters" in the U.S. market, has shown strong performance, but significant investment risks are present this year [4] - Recommended sectors include resilient dividend assets such as utilities, telecommunications, and banking, as well as industries benefiting from the AI trend, particularly those in the infrastructure to downstream application transition [4]

Core Viewpoint - The global asset allocation should focus on three core factors: de-globalization, debt cycles, and AI industry trends [1] Group 1: Investment Strategy - The current global economic uncertainty necessitates an investment strategy that adopts a "global barbell strategy," which includes both stable assets and high-yield, high-volatility assets [1] - The company maintains a positive outlook on investments in gold, short-duration U.S. Treasury bonds, Chinese interest rate bonds, and China's dividend assets combined with AI technology industries [1]

Investment Rating - The industry is rated as "Buy" for several key companies, including Xining Special Steel, Nanjing Steel, Hualing Steel, and Baosteel [8]. Core Viewpoints - The market remains in a state of fluctuation, with the non-ferrous sector outperforming the black metal sector. Financial attributes of metals like gold, silver, and copper are expected to benefit from the current economic conditions [2]. - The macroeconomic policies are showing effectiveness, with the manufacturing PMI rising to 49.5% in May, indicating an overall expansion in economic output [4][12]. - The steel industry is experiencing a divergence in profitability across the black metal supply chain, with some companies undervalued and presenting good strategic investment opportunities [2][4]. Supply Analysis - Daily molten iron production has slightly decreased to 2.417 million tons, with a minor decline in the utilization rate of blast furnaces to 90.6% [3][11]. - The total inventory of steel has decreased by 0.1%, with a narrowing decline rate of 2.2 percentage points [23][25]. Demand Analysis - Apparent consumption of the five major steel products has weakened, with rebar consumption dropping by 7.9% week-on-week [38][49]. - The average weekly transaction volume for construction steel has increased by 2.0% [40]. Raw Material Analysis - Iron ore prices have declined, with the Platts 62% iron ore price index at $96.1 per ton, down 0.7% week-on-week [57]. - The average daily iron ore import volume at 45 ports has increased by 17.9% week-on-week [57]. Price and Profit Analysis - Steel prices are showing a slight improvement, with the current spot price for rebar in Beijing at 3,170 RMB per ton, up 1.9% week-on-week [73]. - The immediate gross profit for long-process rebar is reported at -134 RMB per ton, indicating a slight improvement in margins [72][73].

Core Viewpoint - The article discusses the underestimation of recession risks in the U.S. by global asset pricing, emphasizing the need for new asset allocation strategies in the context of the debt cycle [3][16]. Group 1: Economic Indicators - The current pricing levels of U.S. equities significantly deviate from the implied risks indicated by recent soft data, suggesting a potential mispricing in the market [4][8]. - The U.S. Soft CAI reflects subjective expectations of future economic conditions from businesses and consumers, which may not align with actual market performance [11][12]. Group 2: Market Sentiment - Recent market sentiment has been overly optimistic, as indicated by the VIX futures returning to a contango state, suggesting rising expectations of volatility and accumulated risks [12][14]. - The BNP global risk premium index has reached historical low levels, indicating high market sentiment towards U.S. equities [14]. Group 3: Investment Strategy - The article suggests a contrarian approach to U.S. equity allocation, focusing on defensive sectors in light of the current market conditions and potential risks [11][12]. - The analysis highlights the importance of monitoring economic policy uncertainty and its impact on equity risk premiums, which are currently misaligned with soft data indicators [9][10].

Introduction - The article discusses the "new investment paradigm" and highlights the ongoing restructuring of the global order, driven by unconventional methods to address the current global supply-demand imbalance [3][9]. Strategic Level - Global asset pricing significantly underestimates the risk of a U.S. recession, with a notable divergence in investor sentiment regarding the U.S. economy [3][18]. - The current market is seen as having a substantial mispricing of recession risks, particularly in U.S. assets, suggesting that a "recession trade" could be a favorable asymmetric trading strategy [3][52]. - The article emphasizes the need for long-term investors to deeply understand the direction of the global order's restructuring and to assess the cost-effectiveness of various assets [22][51]. Tactical Level - Short-term sentiment in global risk assets, particularly U.S. equities, is perceived to be overstretched, following a significant rebound catalyzed by tariff easing [5][53]. - Indicators such as the VIX futures returning to a contango state and the BNP global risk premium index reaching historical lows suggest high market sentiment but also an accumulation of risk [5][56]. - The article advises a contrarian approach to U.S. equity allocation, focusing on defensive sectors in the short term while monitoring developments in negotiations with key global players [5][64]. Macro Trading Background - The new investment paradigm is framed by three macro trading backgrounds: U.S. Treasury yields expected to remain high for an extended period, Chinese bond yields expected to remain low, and an elevation in the global risk premium [3][13]. - The article outlines the implications of these macroeconomic factors on global asset correlations and volatility, indicating a potential long-term disruption to existing asset allocation frameworks [13][18].