According to a research report, the firm reiterates adherence to the major theme of "national security," along with the two main lines of "resource and energy self-sufficiency" and "productivity enhancement." It recommends countries, asset classes, and industry sectors positioned at the upstream of raw materials and the AI industrial chain. During a "behind the curve" period, the de facto monetary policy easing by the U.S. Federal Reserve benefits global energy resources and efficient production-oriented assets. Considering that China has now become a provider of global supply capacity, the firm continues to favor the outperformance of Chinese "safe assets." The main points are outlined below.

Since the beginning of this year, the Fed's balance sheet reduction has led to a marginal improvement in the total amount of U.S. dollar liquidity. Coupled with investment-driven economic growth supporting corporate earnings, global equity markets have maintained robust growth, largely in line with the firm's expectations at the start of the year. Simultaneously, sectors related to supply chain security and productivity enhancement, such as hard technology, industrials, and energy, have performed well, with broad "safe assets" gaining market attention.

Looking ahead, under the overarching backdrop of a large U.S. government and national security dominance, a K-shaped divergence is expected to persist. On one hand, high investment activity, representing the upper arm of the K-shape, supports the continued upward trajectory of the nominal economic cycle. Investment demand and supply chain pressures may keep inflation elevated, making it difficult for the Fed to cut interest rates again within the year.

On the other hand, employment and consumption, representing the lower arm of the K-shape, continue to face pressure under high interest rates and high inflation. Combined with the expanding financing needs of the U.S. AI economy, this also makes it difficult for the Fed to turn substantially hawkish in practice, resulting in a scenario of being "hawkish in name but dovish in reality, or behind the curve."

Therefore, the market may initiate "behind the curve" trading, the essence of which is trading on the Fed's increased tolerance for inflation. Historically, during "behind the curve" periods, physical assets, upstream industrial and energy sectors, and technology have maintained expansion potential.