Core Viewpoint - The article discusses the potential economic outlook for the U.S. under a "big fiscal + loose monetary" policy framework, suggesting that inflation may be used to manage the national debt, contingent on a compliant Federal Reserve that supports low interest rates [1][8]. Group 1: Debt and Fiscal Policy - The U.S. federal debt has surged to nearly $30 trillion, up from $17 trillion in 2019, marking an increase of $12 trillion [2]. - Interest payments on this debt have risen from 2.4% of the debt balance in 2019 to 3.6% currently, making interest payments the second-largest expenditure in the federal budget [4][2]. - The estimated fiscal deficit for 2024 is projected at $1.1 trillion, nearly equal to the $0.9 trillion in interest payments, indicating a significant strain on other budgetary allocations [4]. Group 2: Revenue and Expenditure Adjustments - A hypothetical reduction in interest rates from 3.6% to 2.5% could save approximately $650 billion in federal funds, which could offset the anticipated annual deficits of $500-600 billion starting in 2026 [6][8]. - Increasing tariffs from around 2.5% to 12.5% could generate an additional $300 billion in revenue annually, further contributing to fiscal stability [6][8]. Group 3: Stock Market and Economic Indicators - The article highlights that the U.S. stock market is facing challenges, particularly with high valuations and the potential for a liquidity crunch as the Treasury seeks to rebuild its cash reserves [13][19]. - The upcoming earnings season is critical, especially for tech stocks with significant overseas revenue, as a weaker dollar could enhance their earnings by approximately 3% [15][19]. - The article warns that without unexpected interest rate cuts from the Federal Reserve, the stock market may experience stagnation or decline due to high valuations and potential liquidity issues [19]. Group 4: Portfolio Performance - The Alpha Dolphin virtual portfolio has underperformed compared to major indices, with a total return of 91.3% since inception, significantly outperforming MSCI China by 88.2% [21][24]. - Recent performance was impacted by declines in major holdings such as TSMC and NetEase, with adjustments planned based on upcoming earnings reports and debt issuance impacts [23][24]. Group 5: Upcoming Events - The article outlines key earnings reports to watch, including ASML, TSMC, and Netflix, emphasizing the importance of their performance and guidance for the semiconductor and subscription sectors [27][28].

Core Viewpoint - Japan is undergoing an unprecedented structural transformation that is expected to reshape its economic landscape and present significant opportunities for investors [1] Group 1: Structural Transformation - Japan is experiencing a series of structural changes, including a shift towards an inflationary economy, reduced reliance on exchange rates, and accelerated corporate reforms, creating opportunities for investors to reassess the Japanese stock market [1][2] - The retirement of the baby boomer generation is leading to a structural labor shortage, driving Japan towards sustainable inflation [5][12] - The expected core CPI in Japan is projected to reach 1.9% in FY2025 and 2.1% in FY2026, indicating a healthy and sustainable inflation pattern [5] Group 2: Exchange Rate Dependency - The end of excessive yen depreciation is expected to improve trade conditions and enhance Return on Equity (ROE) [1][8] - Japanese companies are accelerating the relocation of production bases overseas and focusing on exporting high-quality products, which makes prices less sensitive to exchange rate fluctuations [8] Group 3: Corporate Reforms - The transition to an inflationary economy is acting as a catalyst for corporate reforms, with companies no longer able to justify hoarding cash that is depreciating [9][12] - Structural labor shortages are creating a demand for continuous wage increases, prompting companies to optimize pricing strategies and improve product and service quality [12] - The Tokyo Stock Exchange's regulatory measures are encouraging companies to be more proactive in stock buybacks, with buybacks increasing even amid weak earnings guidance [12][15] Group 4: Investment Opportunities - Corporate reforms present three major themes for investors: 1. The separation of parent-subsidiary listings is accelerating, with returns of subsidiaries relative to parents increasing since 2024 [15] 2. Companies reducing strategic holdings tend to engage in more stock buybacks, indicating that such reductions can enhance capital efficiency [15] 3. The inflationary environment is expanding opportunities in real estate, particularly for companies holding non-core properties [15] Group 5: Political Risks - The upcoming Senate elections on July 20 pose a short-term risk, as historical data shows that markets tend to be cautious before elections and rebound afterward [16][17] - All major opposition parties plan to include consumption tax cuts in their election manifestos, which could increase the risk of rising interest rates [16]