Core Viewpoint - The global market continues to experience high volatility due to geopolitical risks, U.S. stagflation, and accelerated AI capital expenditures, leading to a significant reduction in market leverage and increased risks of stock and commodity price declines [3] Geopolitical Risks - Geopolitical uncertainties, particularly in the Middle East, remain high, with economic impacts persisting even as military conflicts may be winding down [3] - The intensification of geopolitical uncertainties may keep global market volatility elevated [3] Economic Outlook - There is a lack of evidence for further economic strengthening despite market trading having priced in improvements for over three months [3] - Major central banks are approaching neutral interest rates, limiting expectations for further monetary easing [3] - High oil prices could compress risk appetite globally amid concerns over stagflation [3] Investment Strategy - In the context of rising volatility and expectations of PPI recovery, switching between stock and bond assets may not provide sufficient defensive protection [3] - Investors are advised to seek defensive dividend styles within stock assets [3] Sector Recommendations - Focus on defensive sectors in light of rising geopolitical tensions and inflationary pressures [4] - Suggested areas for investment include: 1. Traditional low-volatility dividend stocks, particularly in the banking sector [4] 2. Technology sectors with significant fundamental improvements that are not yet fully priced in, such as storage and optical communication hardware [4] 3. Cyclical sectors like oil, gas, and non-ferrous metals that may benefit from increased demand for safe-haven assets [4]

Economic Indicators - In April 2025, the PPI decreased by 2.7% year-on-year, marking 31 consecutive months of negative growth[1] - The CPI showed a slight decline of 0.1% year-on-year, remaining around 0% for 25 months[1] - The GDP deflator index has been negative for 8 consecutive quarters, setting a historical record for duration[1] Price Trends - Food prices, including pork, have been declining, with pork CPI turning positive since April 2024, but overall support for CPI remains weak[1][2] - The decline in PPI is broad and significant, with both production and living materials experiencing substantial price drops[2] Consumption and Policy Recommendations - Social retail sales grew by 5.1% year-on-year in April 2025, but the growth rate has decreased compared to the previous month[3] - To stimulate consumption, it is essential to enhance residents' income, particularly for low- and middle-income groups, and stabilize property and stock market incomes[3] - The report suggests implementing more proactive fiscal and monetary policies, including government-led investments in new infrastructure and urban renewal[2] Market Strategy - Investment strategies should focus on defensive sectors, "expanding domestic demand," and self-sufficiency in technology[6][7] - The report highlights the importance of supporting struggling enterprises and enhancing financing to stabilize foreign trade[5][6] Risks - Potential risks include policy implementation falling short of expectations, underperformance of listed companies, geopolitical conflicts, and insufficient consumer recovery[8]