Core Viewpoint - The global economy is undergoing a transformation, prompting investors and policymakers to act cautiously amid uncertain policies and market volatility. Despite these challenges, major economies remain resilient, and central bank interest rate cuts are expected to create opportunities in global equities [1]. Group 1: Economic Outlook - The U.S. real GDP growth is projected to slow from nearly 3% in 2023-2024 to 1.6% in 2025, primarily due to weakening private demand and the impact of tariffs on prices and consumer confidence [2]. - Average tariffs of approximately 15% are expected to cause economic losses and a temporary rise in inflation, with the Federal Reserve anticipated to cut interest rates three times in the latter half of 2025 [2]. Group 2: Geopolitical Risks - The rising geopolitical tensions, exacerbated by U.S. tariffs and reduced commitments to European security, may lead to increased unity in Europe as countries seek new trade agreements and recognize the advantages of collective negotiation [3]. Group 3: Asset Allocation - Despite a bleak growth outlook, corporate performance is expected to remain strong, supporting a slightly aggressive asset allocation and inflation-hedging strategies. The focus will be on global equities, commodities, gold, and infrastructure investments for stable cash flows [4]. - The changing correlation between the dollar, stocks, and bonds highlights the importance of diversifying currency allocations [4]. Group 4: Bond Market Insights - Investors are likely to demand higher premiums on U.S. Treasuries due to unclear trade policies and rising public debt. The central bank's interest rate cuts will support short-term bonds, benefiting European and emerging market bonds [5]. Group 5: Stock Market Considerations - Stocks may record low single-digit returns in the latter half of the year, with industry selection becoming crucial. The attractiveness of the European market is expected to benefit small-cap stocks, with a focus on domestic-driven sectors to mitigate tariff risks [6]. Group 6: Emerging Markets Opportunities - Emerging market stocks are anticipated to gain traction in the latter half of 2025, with India and ASEAN becoming key beneficiaries of global supply chain shifts. The "Make in India" initiative is attracting multinational companies, particularly in defense and IT sectors [7]. Group 7: Alternative Investments - The challenging geopolitical environment is prompting investors to diversify into private and alternative assets, with private debt and infrastructure expected to remain attractive due to strong direct lending and fundraising [8].

Investment Rating - The industry investment rating is "Positive" and maintained [10] Core Viewpoints - In April, narrow infrastructure investment was 1.7 trillion yuan, a year-on-year increase of 5.8%, with a month-on-month growth rate decrease of 0.1 percentage points. Broad infrastructure investment reached 2.2 trillion yuan, a year-on-year increase of 9.8%, with a month-on-month growth rate decrease of 0.9 percentage points [7][11] - The report indicates that railway investment has accelerated, while water conservancy investment increased by 6.1% year-on-year, and transportation investment increased by 4.1% year-on-year. However, the month-on-month growth rates for these sectors showed a decline [11][12] - Cumulative narrow infrastructure investment from January to April was 4.9 trillion yuan, a year-on-year increase of 5.8%, with stable month-on-month growth rates [11][12] Summary by Relevant Sections - **Narrow Infrastructure Investment**: In April, narrow infrastructure investment was 1.7 trillion yuan, with transportation, storage, and postal services accounting for 0.8 trillion yuan, and water conservancy, environment, and public facilities management also at 0.8 trillion yuan. Year-on-year increases were 4.1% and 6.1% respectively, but month-on-month growth rates decreased [7][11] - **Broad Infrastructure Investment**: Broad infrastructure investment in April was 2.2 trillion yuan, with a year-on-year increase of 9.8%. The electricity, heat, gas, and water production and supply sector saw a significant year-on-year increase of 24.5% [11][12] - **Physical Workload**: From January to April, cement production decreased by 2.8% year-on-year, while excavator sales increased by 17.6% year-on-year, indicating a potential acceleration in water conservancy projects [11][12]

Investment Strategy - The report highlights that the recent implementation of "reciprocal tariffs" by the U.S. is expected to increase global trade costs, leading to potential inflationary or recessionary pressures on the global economy [1][8] - The tariffs include a 10% minimum baseline tariff and higher tariffs on specific countries, with China facing a 34% tariff, which could exacerbate external demand challenges for China [7][8] Short-term and Mid-term Market Impact - In the short term, risk appetite is likely to be under pressure due to inflation or recession narratives, impacting asset pricing and increasing demand for safe-haven assets [3][10] - Historical data suggests that after tariff announcements, the A-share market may experience initial pressure followed by potential rebounds, depending on new catalysts [10] - Mid-term asset pricing will revert to fundamentals, with the actual impact of tariffs and retaliatory measures from other countries being crucial [10] Policy Response and Domestic Growth - The report emphasizes the need to monitor the actual impact of tariffs and potential policy responses, as external demand contraction may necessitate stronger domestic growth policies [2][9] - There is an expectation for increased domestic policy measures to stimulate growth, such as interest rate cuts and consumption incentives, especially if negotiations yield positive outcomes before the tariffs take effect [2][9] Asset Allocation Recommendations - The report suggests a defensive approach focusing on dividend-paying assets, as market risk appetite is expected to decline [4][11] - Key sectors to consider include telecommunications, transportation, utilities, and state-owned banks, which are likely to attract defensive capital [11] - Additionally, there is a recommendation to explore offensive opportunities in sectors that may benefit from tariff exemptions or domestic growth policies, such as local consumption and infrastructure investments [12]