The current economy exhibits a diverging trajectory. While the AI and semiconductor sectors are driving partial bull markets, the overall market remains fragile. Investors should focus on the following key points:

* Core Growth Areas: Semiconductors and AI infrastructure are the primary drivers of long-term growth.

* Asset Allocation Advice: Increase holdings in scarce physical assets like gold, critical metals, and certain promising real estate to hedge against currency devaluation risks.

* Market Risk Warning: Be wary of the excessive dominance of the "Magnificent Seven" in broad market indices, as their strong performance masks the weakness of other companies.

* Policy and Liquidity Impact: Federal Reserve policy fluctuations and the US dollar's trajectory are key variables; a strengthening dollar could trigger adjustments in risk assets.

* Economic Structural Contradictions: Wealth growth among high-income groups supports consumption, but persistent inflation continues to erode the purchasing power of middle- and low-income households, alongside a weak employment market.

The market is expected to remain volatile, making asset selection crucial for returns. Avoid over-concentration in stocks inflated by hype.

Summary

The view of an economy re-accelerating for the better is actually quite one-sided, currently propped up mainly by affluent household assets and AI-driven investment. For investors, this cycle cannot rely on a simple expectation of a broad market rally:

* The core of long-term growth lies in semiconductors and AI infrastructure.

* Overweight scarce physical assets: gold, metals, and certain promising real estate markets.

* Remain cautious of broad market indices: the high weighting of the "Magnificent Seven" masks overall market fragility.

* Watch the US dollar closely: its direction will determine whether this cycle continues or breaks.

Similar to the period from 1998 to 2000, the bull market might persist for a while longer, but volatility will intensify. Asset selection will be key to outperforming the market.

Economic Divergence

Market performance reflects the true state of the economy. As long as stock markets hover near historical highs, talk of a recession remains hard to believe.

We are in a clearly diverging economic environment:

* The top 10% of income earners contribute over 60% of consumption, accumulating wealth through stocks and property.

* Meanwhile, inflation continuously erodes the purchasing power of middle- and low-income households. This widening gap explains why, on one hand, the economy appears to be "re-accelerating," while on the other, the job market remains sluggish and the cost-of-living crisis persists.

Fed Policy Uncertainty

Be prepared for policy volatility. The Fed must navigate both inflationary pressures and the political cycle. This creates opportunities but also means the risk of sudden downturns if market expectations shift.

The Fed is currently in a dilemma:

* On one hand, strong GDP growth and resilient consumption support slowing the pace of rate cuts.

* On the other, high market valuations mean that delaying cuts could trigger "growth concerns."

Historical precedent shows that cutting rates during strong earnings (like in 1998) can extend a bull market. But this time is different: inflation remains stubborn, the "Magnificent Seven" report stellar profits, while the other 493 companies in the S&P 500 show mediocre performance.

Asset Selection in a Nominal Growth Environment

Hold scarce physical assets (gold, key commodities, property in supply-constrained regions) and sectors representing productivity (AI infrastructure, semiconductors), while avoiding over-concentration in stocks inflated by online hype.

The coming period is unlikely to see a broad-based boom; it looks more like a partial bull market:

* Semiconductors remain the core of AI infrastructure, with related investments continuing to drive growth.

* Gold and physical assets are reasserting their value as hedges against currency debasement.

* Cryptocurrencies currently face pressure from deleveraging and Treasury supply, but structurally, they are linked to the same liquidity cycle driving gold.

Real Estate and Consumption Dynamics

If real estate weakens in tandem with the stock market, the "wealth effect" supporting consumption would be impacted.

Real estate might see brief rebounds on modest rate cuts, but deeper issues persist:

* Supply-demand imbalances due to demographic shifts.

* Rising default rates as student loan and mortgage forbearance periods end.

* Significant regional disparities (older demographics have asset buffers, younger families are under pressure).

Dollar Liquidity and Global Allocation

The US dollar is the key factor influencing the broader picture. If the global economy weakens while the dollar strengthens, more vulnerable markets could face problems before the US does.

A neglected risk is the contraction of US dollar supply:

* Tariff policies reduce trade deficits, limiting the flow of dollars back to US assets.

* Fiscal deficits remain high, but foreign buyers' appetite for US Treasuries is waning, potentially triggering liquidity issues.

Futures market data shows extreme net short positions against the dollar, which could trigger a short squeeze, destabilizing risk assets.

Political Economy and Market Psychology

We are in the late stage of a financialization cycle:

* Policymakers aim to "keep the show on the road" until key political events (like elections) pass.

* Structural inequalities (rent rising faster than wages, wealth concentration among older demographics) fuel populist pressures, prompting policy adjustments in areas like education and housing.

* The market itself is reflexive: heavy concentration in a few large-cap stocks both supports valuations and sows the seeds of fragility.

The current economy exhibits a diverging trajectory. While the AI and semiconductor sectors are driving partial bull markets, the overall market remains fragile. Investors should focus on the following key points:

* Core Growth Areas: Semiconductors and AI infrastructure are the primary drivers of long-term growth.

* Asset Allocation Advice: Increase holdings in scarce physical assets like gold, critical metals, and certain promising real estate to hedge against currency devaluation risks.

* Market Risk Warning: Be wary of the excessive dominance of the "Magnificent Seven" in broad market indices, as their strong performance masks the weakness of other companies.

* Policy and Liquidity Impact: Federal Reserve policy fluctuations and the US dollar's trajectory are key variables; a strengthening dollar could trigger adjustments in risk assets.

* Economic Structural Contradictions: Wealth growth among high-income groups supports consumption, but persistent inflation continues to erode the purchasing power of middle- and low-income households, alongside a weak employment market.

The market is expected to remain volatile, making asset selection crucial for returns. Avoid over-concentration in stocks inflated by hype.

Summary

The view of an economy re-accelerating for the better is actually quite one-sided, currently propped up mainly by affluent household assets and AI-driven investment. For investors, this cycle cannot rely on a simple expectation of a broad market rally:

* The core of long-term growth lies in semiconductors and AI infrastructure.

* Overweight scarce physical assets: gold, metals, and certain promising real estate markets.

* Remain cautious of broad market indices: the high weighting of the "Magnificent Seven" masks overall market fragility.

* Watch the US dollar closely: its direction will determine whether this cycle continues or breaks.

Similar to the period from 1998 to 2000, the bull market might persist for a while longer, but volatility will intensify. Asset selection will be key to outperforming the market.

Economic Divergence

Market performance reflects the true state of the economy. As long as stock markets hover near historical highs, talk of a recession remains hard to believe.

We are in a clearly diverging economic environment:

* The top 10% of income earners contribute over 60% of consumption, accumulating wealth through stocks and property.

* Meanwhile, inflation continuously erodes the purchasing power of middle- and low-income households. This widening gap explains why, on one hand, the economy appears to be "re-accelerating," while on the other, the job market remains sluggish and the cost-of-living crisis persists.

Fed Policy Uncertainty

Be prepared for policy volatility. The Fed must navigate both inflationary pressures and the political cycle. This creates opportunities but also means the risk of sudden downturns if market expectations shift.

The Fed is currently in a dilemma:

* On one hand, strong GDP growth and resilient consumption support slowing the pace of rate cuts.

* On the other, high market valuations mean that delaying cuts could trigger "growth concerns."

Historical precedent shows that cutting rates during strong earnings (like in 1998) can extend a bull market. But this time is different: inflation remains stubborn, the "Magnificent Seven" report stellar profits, while the other 493 companies in the S&P 500 show mediocre performance.

Asset Selection in a Nominal Growth Environment

Hold scarce physical assets (gold, key commodities, property in supply-constrained regions) and sectors representing productivity (AI infrastructure, semiconductors), while avoiding over-concentration in stocks inflated by online hype.

The coming period is unlikely to see a broad-based boom; it looks more like a partial bull market:

* Semiconductors remain the core of AI infrastructure, with related investments continuing to drive growth.

* Gold and physical assets are reasserting their value as hedges against currency debasement.

* Cryptocurrencies currently face pressure from deleveraging and Treasury supply, but structurally, they are linked to the same liquidity cycle driving gold.

Real Estate and Consumption Dynamics

If real estate weakens in tandem with the stock market, the "wealth effect" supporting consumption would be impacted.

Real estate might see brief rebounds on modest rate cuts, but deeper issues persist:

* Supply-demand imbalances due to demographic shifts.

* Rising default rates as student loan and mortgage forbearance periods end.

* Significant regional disparities (older demographics have asset buffers, younger families are under pressure).

Dollar Liquidity and Global Allocation

The US dollar is the key factor influencing the broader picture. If the global economy weakens while the dollar strengthens, more vulnerable markets could face problems before the US does.

A neglected risk is the contraction of US dollar supply:

* Tariff policies reduce trade deficits, limiting the flow of dollars back to US assets.

* Fiscal deficits remain high, but foreign buyers' appetite for US Treasuries is waning, potentially triggering liquidity issues.

Futures market data shows extreme net short positions against the dollar, which could trigger a short squeeze, destabilizing risk assets.

Political Economy and Market Psychology

We are in the late stage of a financialization cycle:

* Policymakers aim to "keep the show on the road" until key political events (like elections) pass.

* Structural inequalities (rent rising faster than wages, wealth concentration among older demographics) fuel populist pressures, prompting policy adjustments in areas like education and housing.

* The market itself is reflexive: heavy concentration in a few large-cap stocks both supports valuations and sows the seeds of fragility.