Our "Summer Chill" forecast is playing out across global markets. Since early May, global equities have entered a topping phase following the rebound led by U.S. TACO 2.0 starting April 8. This has been followed by volatile consolidation and divergence. Emerging markets like India, Latin America, and Southeast Asia, which are unrelated to or even negatively impacted by the AI trend, have led this summer correction, experiencing the steepest declines. Meanwhile, stock markets in regions like Japan, South Korea, and Taiwan, which are at the forefront of the recent AI rally, continued their upward momentum and short squeeze on May 21, following Nvidia's slightly better-than-expected earnings report.
However, we maintain a cautious view on global equity markets for June and July, awaiting the "universal cooling" during these months. The world is vast, yet shares the same warmth and chill. As the summer heat wanes, rivers may overflow, turning men into fish and turtles.
Based on the predictions from our "Summer Chill" keynote speech at the Haitong International Summer Strategy Conference on May 6, we foresee an N-shaped trajectory for the summer market. We also identified key inflection points: 1) The U.S.-China diplomatic engagement around May 13-15, which marked the first potential shift in the summer trend, possibly changing its slope from a short squeeze to consolidation. 2) The Nvidia earnings catalyst on May 21 (Beijing Time). Better-than-expected results could reignite a short-term AI rally or even a short squeeze. 3) Key U.S. inflation data and the Federal Reserve's policy meeting in June. The U.S. CPI release at 8:30 PM Beijing Time on June 10 will dictate the pace of interest rate hikes. * If May CPI is ≥3.9%: The 10-year U.S. Treasury yield could rise significantly beyond expectations, triggering a notable valuation correction in the global tech bull market. * The Fed's policy decision, dot plot, and Chair Powell's press conference on June 17-18 (Beijing Time). 4) The pace and intensity of upward pressure on the global asset pricing anchor—the 10-year U.S. Treasury yield—this summer. * Breach of 4.5%: Could initiate a phase of correction in tech stocks. * Range of 4.7%–5.0%: A break above 5% could push the equity market correction into a short-term panic phase, opening a window for medium-to-long-term positioning. 5) Intense pressure from share lock-up expiries and reductions in the Hong Kong market during June and July.
The "Summer Chill" of 2026 is not about a black swan event for global markets, but rather the aftermath of geopolitical conflicts—a gray rhino. Caution is warranted for capital markets in the summer of 2026, much like the vigilance needed in the summer of 1998. Beyond the risks of resurgent overseas inflation and rising long-term U.S. bond yields, one must also be wary of potential severe turbulence in emerging markets like India, Southeast Asia, and Latin America.
Looking ahead to the medium-to-long term, the period from May to September 2026 represents a crucial window for accumulating core AI assets during market fluctuations. Strategically, the greatest risk is not volatility but missing out on the opportunity. At history's turning points, one must move with the times.
True character is revealed in turbulent times. History's turning points are often moments of the most intense wealth redistribution. Moving with the times and aligning with trends are key to seizing opportunities amidst change.
Regarding the cycle of this AI technology wave, I believe we have passed halftime. The second half is often characterized by intense consensus, excitement, and volatility. From a Juglar cycle perspective, a medium-term cycle of equipment renewal investment typically lasts 8-10 years. The first half is characterized by infrastructure development, akin to the "road and network building" phase of the 1990s internet boom (1993-1995). The second half focuses on application explosion and societal transformation, similar to the "application explosion" phase of the late 1990s internet wave (1996-2000).
Based on historical patterns, we judge that this U.S.-led AI wave is likely entering its second half, comparable to the 1998 period of the internet wave. This major tech cycle is likely not nearing its end but has progressed past the midpoint into the latter stage. This phase involves the rapid diffusion of AI applications and continuous business model innovation. We are seeing an exponential, premature rise in token consumption for cost-effective models and multi-model routing platforms. AI adoption rates will accelerate, and AI's empowerment and transformation of various industries will deepen.
Corresponding to the fundamentals, the AI boom in U.S. capital markets has entered the climactic, later stages. Historical experience shows that when capital markets reach an absolute consensus on a technological wave, it often coincides with the mid-to-late stages of the market cycle—a climax accompanied by significant volatility.