Core Viewpoint The underlying logic of the Reagan cycle is to use tight monetary policy to suppress inflation, loosen regulation to stimulate growth, ultimately creating a cycle of "economic growth - strong dollar - strong US stocks" in terms of growth, liquidity, and asset. Whether Trump can replicate Reagan, we believe, hinges on the sustainability of the AI technology revolution. US Stocks: Under the drive of the technology industry in 2024, US stocks are not weak. The future trend of US stocks depends on the sustainability of the technology revolution driven by AI. US Bonds: The probability of experiencing a round of "re-inflation" is low. The question of how much downward space there is for US bond yields, or whether they will maintain high volatility, is where the current market divergence lies. We believe that if technology has sustainability, US stocks will be relatively strong, and US bond yields may remain high due to the "teeter-totter" effect. US Dollar: The future trend depends on the interest rate differential between the US and non-US economies brought about by AI. Industrial Commodities: In 2025, the pricing of industrial commodities will be more driven by expectations. Gold: Gold prices are not weak, but the conditions for a strong gold market (i.e., significant liquidity easing and geopolitical factors) are uncertain. Summary Many people compare Trump to the former Reagan, not only because their governance philosophies are somewhat similar, such as tax cuts and deregulation, but also because Trump specifically referenced during his campaign, "Are you better off than you were four years ago?" as a tribute to Reagan of the 1980s. During Reagan's presidency, he addressed a series of economic issues in the US and became famous for the Reagan cycle. The so-called Reagan cycle refers to the core cycle chain of "economic growth - strong dollar - strong US stocks," supported by the policy combination of "tight monetary policy" and "loose regulation." As Trump is about to take office as the new President of the United States, whether he can replicate the Reagan cycle, initiate a "Trump" cycle of his own, and what impact it will have on global asset pricing is a highly focused question in the current market. 1. Asset Mapping Corresponding to the Reagan Cycle Reagan is famous primarily because he successfully ended high inflation and, while controlling inflation, accomplished the seemingly impossible task of driving the US into a new growth cycle and revitalizing the dollar index. Due to successfully addressing the inflation issue and initiating a rate-cutting cycle, benefiting from the resonance of liquidity and growth, US stocks entered a long bull market; during the rate-cutting cycle, US bonds also performed well. With US policy adjustments, the dollar index first strengthened and then weakened. Under the framework of the Reagan cycle, the overall performance of major asset classes is: global commodities weakened as inflation cooled, US stocks strengthened with US growth and dollar repatriation, and US bonds rallied due to declining inflation. , but under the support of technology, tight monetary policy was accompanied by a return of the dollar, which is also the reason why tight monetary policy can avoid hurting the liquidity of the stock market. The U.S. has become a global high-interest rate haven, with low-cost funds from overseas continuously flowing into the U.S. On one hand, this boosts U.S. financial assets and increases the wealth effect for residents; on the other hand, it promotes real investment in the U.S., aiding in the completion of the AI industry investment boom. 2. Whether the Trump cycle can proceed smoothly depends on the sustainability of technology, which is also key to the current direction of the U.S. economy and assets. This round of the AI revolution originated from Biden's industrial stimulus policy, which is currently crucial for U.S. stocks and the return of the dollar. The U.S. technology sector is experiencing large-scale investments, with investments first reflected in construction spending, while equipment investment is still in the early stages of growth. Clearly, this round of AI is also key to the direction of the U.S. economy. The explosive growth of the AI industry primarily promotes investment growth. Investment in computer and electrical equipment products stimulates productivity enhancement. Understanding this allows us to comprehend why the U.S. has shown resilience in growth in recent years, why inflation is difficult to suppress in the final mile, why U.S. stocks are relatively strong, and why U.S. bonds are relatively weak. : In 2025, the pricing of industrial products will be more based on expectations. High interest rates suppress demand, trade frictions may escalate, and industrial chains are being restructured, leading to potentially weak global demand for industrial products. The Chinese economy is still in a weak recovery process, and global manufacturing is weak, making it difficult for global industrial product demand to improve significantly, thus keeping industrial product prices weak 5. Gold: The strength of gold prices is not weak, but the conditions for its further strength (i.e., significant liquidity easing and geopolitical factors) are uncertain. Gold is primarily priced based on its financial and monetary attributes. In the medium term, gold prices are not weak, and further strength depends on U.S. Treasury yields and geopolitical conflicts. The reason gold prices are not weak is due to central banks' continued purchases of gold supported by the logic of changes in the international monetary system. Author of this article: Zhou Junzhi S1440524020001, Sun Yingjie, Source: CSC Research Macro Team, Original Title: "Trump Cycle, How Assets Are Priced | China Looks at the World (7)" Risk Warning and Disclaimer The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk