The previous issue of Chief Insights examined two highly debated investment logics and pointed out their convergence under certain conditions. This issue will review market changes and investment strategies over the past month, analyze the macroeconomic and industrial shifts expected in April, and provide fundamental strategic recommendations.
Over a month has passed since the U.S.-Israel-Iran conflict began on February 28, with markets exhibiting a broadly defensive stance. Recent market movements have validated the core logic of "cycle as the framework, profit as the anchor, and safety as the foundation." Energy and defensive assets led gains, while growth and cyclical sectors faced pressure, reflecting a rebalancing of "risk pricing and cyclical resilience" amid Middle Eastern geopolitical tensions. Among major asset classes, only crude oil, coal, aluminum, and the U.S. dollar index posted gains, while others declined. Within the A-share market, coal, utilities, banking, communications, and power equipment sectors delivered positive returns, while others recorded losses.
In terms of major assets, energy and industrial metals such as ICE Brent crude (+55.4%), coking coal (+11.5%), and LME aluminum (+9.7%) led the gains, reflecting supply premiums and safe-haven demand triggered by Middle Eastern conflicts. Fixed-income assets like government and credit bonds saw modest increases, indicating a preference for safety. In contrast, major A-share indices, Hong Kong stocks, tech shares, and precious metals generally declined due to falling risk appetite and shrinking profit expectations for growth stocks, aligning with the cyclical pattern of "safety first, growth later" amid external shocks.
Within A-share sectors, defensive and energy-related industries such as coal (+5.0%), utilities (+3.5%), and banking (+3.2%) outperformed, while growth and cyclical sectors like non-ferrous metals (-16.0%), defense and aerospace (-15.4%), and media (-14.8%) lagged. This divergence stemmed from Middle Eastern conflicts driving energy premiums higher, enhancing the profit stability and safety attributes of energy and utilities sectors. Concurrently, market concerns over cost pressures and stagflation risks prompted capital shifts from high-valuation growth sectors to low-valuation defensive ones, reflecting a short-term safety-first approach without altering the medium-to-long-term industrial upgrade trajectory.
Over the past month, Chief Insights focused on analyzing the U.S.-Israel-Iran conflict and the HALO strategy. Market perceptions of energy shocks diverged into two logics: one viewing Middle Eastern oil price hikes as temporary disruptions within a technological revolution cycle, not derailing the mid-cycle trend of Sino-U.S. technological upgrades and equipment investment (Juglar cycle); the other treating sustained high oil prices as a decisive factor potentially triggering U.S. inflation-recession-stagflation chains, bursting the AI bubble and ending the new cycle. The first logic is supported, considering the Middle East crisis a one-time oil supply disruption with global hedging mechanisms limiting its impact to short-term energy premiums. The resilience of the Chinese and U.S. economies and industrial upgrade policies provide mid-cycle stability, while geopolitical conflicts, resembling a game of chicken, have clear de-escalation boundaries.
The HALO strategy represents a low-risk approach during the "new technology breakthrough, new industry not yet dominant" phase, underpinned by the integration of "old foundations + new demand + new barriers" amid cyclical revival. Assets under this strategy blend value and growth characteristics, serving as portfolio stabilizers and enablers for the new cycle, though misconceptions about old-versus-new industry oppositions must be addressed. Investment-wise, leveraging hard assets like energy and coal to build safety buffers, while focusing on genuine growth targets with technological barriers such as AI infrastructure, is advised. Once external shocks subside, markets will revert to the industrial cycle led by hard assets and true growth drivers.
These investment logics have withstood recent tests, with conflicts spurring safety-oriented trades. Entering April, short-term investor focus centers on whether conflicts will escalate or ease, while long-term attention remains on post-conflict public policies and supply shocks' potential disruptions to new technology expansion cycles.
Middle Eastern developments remain the key macroeconomic variable for April investments externally, while domestically, China's economic recovery pace holds greater significance. April is a critical window for the U.S.-Israel-Iran conflict trajectory, centered on the interplay between "de-escalation" and "protracted escalation," directly impacting global energy supply and inflation expectations. Current dynamics involve parallel military and diplomatic tracks: continued U.S.-Israel airstrikes on Iranian nuclear and military facilities, asymmetric retaliation by Iran via proxy groups, and oil price volatility from disrupted Hormuz Strait shipping. U.S. peace proposals were rejected by Iran, which counter-proposed five ceasefire conditions focused on sovereignty and compensation. The U.S. extended its Strait reopening ultimatum to April 6, with negotiations ongoing but military actions persisting, highlighting complex stalemates.
Based on think-tank assessments and macroeconomic logic, April scenarios revolve around "energy security" and "negotiation games." The most likely outcome is a ceasefire agreement by late April, with Iran accepting mediation due to military and economic pressures, pulling oil prices back to $80–85/barrel for temporary stability without resolving core issues. Alternatively, a low-intensity attrition war could persist, with Iran sustaining retaliation via external support, pushing oil prices to $120–150/barrel and exacerbating global inflation. Key variables include U.S.-Iran negotiations and third-party mediation diplomatically, Iranian missile stocks and Israeli ground operations militarily, and oil prices and shipping disruptions economically.
From a macroeconomic perspective, April offers a relative "de-escalation window," though comprehensive peace remains unlikely. The conflict has reshaped Middle Eastern geopolitics, with nuclear issues, proxy networks, and energy security becoming long-term concerns. High uncertainty necessitates dynamic monitoring of core variables, crucial for subsequent macroeconomic and asset allocation logic.
Compared to external uncertainties, China's economy is confirmed to be steadily recovering. The latest official manufacturing Purchasing Managers' Index (PMI) rose from 49% in February 2026 to 50.4% in March, exceeding the 50.1% forecast. This marks the strongest reading since last March, rebounding after two months of contraction, buoyed by increased government spending early in the year and export resilience driven by global AI-related demand. Specifically, output growth accelerated (production index at 51.4% in March vs. 49.6% in February), and new orders rebounded sharply (51.6% vs. 48.6%). External demand also strengthened, with new export orders rising (49.1% vs. 45.0%). The purchasing volume index reached 50.9%, up 2.7% from February; the employment index was 48.6%, up 0.2%, though still in contraction; and supplier delivery times improved to 49.5%, up 0.4%, yet below the threshold.
Meanwhile, prices increased, driven by rising crude oil and non-ferrous metal prices. The input price index surged to 63.9%, up 9.1% from February, while the output price index hit 55.4%, up 4.8%, both reaching four-year highs. The production and business activity expectation index edged up to 53.4%. This further confirms that China's Juglar cycle, despite high oil price impacts, continues its orderly recovery.
PMI data reflects economic cycles macroscopically, while micro-level evidence validates the Juglar cycle's expansion. On March 28–29, Zhangxue Motorcycle secured double victories at the WSBK Portugal round, breaking decades of dominance by European, American, and Japanese brands. This triumph signifies more than a single sporting achievement—it marks Chinese manufacturing's shift from internal competition to global高端 expansion, from low-end to high-end, underscoring the unstoppable momentum of the高端 manufacturing-driven Juglar cycle. The victory demonstrates hardcore manufacturing capabilities in self-developed powertrains, lightweight frames, and precision tuning, signaling China's move beyond low-price internal competition to global contests based on technology, quality, and branding. With equipment upgrades and industrial upgrades resonating, manufacturing is transitioning from存量博弈 to增量 creation. Zhangxue Motorcycle's breakthrough epitomizes the micro-level manifestation of industrial upgrading and technological breakthroughs within the Juglar cycle. Cyclical forces have shifted to高端 manufacturing leadership, with short-term disturbances not altering medium-to-long-term trends. Chinese manufacturing is poised to claim a central role in the global industrial landscape through technological prowess.
Even if Middle Eastern conflicts ease in April, their impacts will not vanish quickly, necessitating adjustments to investment logic. Conflicts have raised energy and shipping costs, exacerbated imported inflation and global stagflation risks, and suppressed risk appetite, which may stage a recovery. However, this will not diminish investor preference for hard assets, driven not only by safety concerns but also by resource revolutions underpinning technological transformations.
For April, investors are advised to maintain a framework anchored by cyclical共振, strategically focus on new growth drivers, and tactically balance offense and defense: Use the HALO strategy as a foundation, allocating to resource-heavy, low-淘汰率 sectors and high-dividend plays; concentrate on new productive forces like AI export chains and高端 manufacturing; balance消费 recovery and fiscal stimulus directions; maintain equity-bond equilibrium and prioritize structure to capture profit recovery trends amid volatility.