Looking ahead to 2026, under the baseline assumption of a soft landing for the U.S. economy, Guosen Securities predicts that the Federal Reserve's weakening independence and employment pressures will reinforce rate cuts, while economic softening will be cushioned by rapid monetary easing. Gold and U.S. equities are expected to outperform Treasuries and cash.

Domestically, with Chinese bond rates remaining low and price levels improving, A-shares still have significant upside potential during the 15th Five-Year Plan period, with a slow and steady bull market anticipated. The 2026 target for the A-share market is set above 4,450 points. Hong Kong stocks, benefiting from a qualitative shift in southbound capital pricing power, are projected to reach 29,000–32,000 points in 2026.

Sector allocation recommendations include: 1. **AI Applications**: Focus on industries boosted by AI advancements, spanning internet/software, media, hardware, semiconductors, automotive/components, retail, and discretionary consumption. 2. **PPI-Linked Sectors**: With PPI improvement outpacing CPI in early 2026, midstream manufacturing and upstream materials—such as electrical equipment, defense, chemicals, machinery, non-ferrous metals, and paper—are poised to benefit. 3. **Non-Bank Financials**: Insurers and brokerages in Hong Kong will gain from market momentum, supported by strong investment returns and core business performance. 4. **Pharma and New Consumption**: Pharmaceuticals remain fundamentally sound after recent corrections, while new consumption continues to outperform traditional sectors. 5. **Cash Flow Stability**: Historically, Hong Kong stocks with stable free cash flow have consistently outperformed, particularly amid a weaker USD and low Chinese bond yields.

**Risks**: Uncertainties include U.S. tariff policies, overseas rate cuts, geopolitical tensions, and sector competition.