Yang Delong: The first quarter's market is nearing its end. How will the market perform in the second quarter?

Ask AI · How will the new U.S. Federal Reserve chair, Wosh, change market liquidity after taking office?

The market outlook for 2026 has already been underway for nearly a quarter. We see that 2026 is indeed a year full of opportunities and challenges. On the opportunities side, I’ve already covered a lot—2026 is the opening year of the “Fifteenth Five-Year Plan,” the direction of technological innovation may be the investment main theme for the whole year; in addition, assets like HALO, resource stocks, and dividend stocks may also present opportunities. The trend of this round of a slow bull and long bull market has already taken shape and will not end because the conflict in the Middle East escalates. The long-term outlook for a slow bull and long bull market will still continue.

From the risk perspective, it’s also something not to be ignored. First is the worsening instability of international conditions. The Russia-Ukraine conflict has not ended, and the Middle East conflict has escalated again. At present, although U.S. President Trump intends to seek a ceasefire—because he cannot achieve the goal of destroying Iran’s regime, and he also fears getting stuck in a quagmire of war—parties including Iran and Israel also need to find a way out, so there remains considerable uncertainty about when the war will end. These factors will all form shocks to the direction of capital markets, and as the situation on the battlefield changes, this impact will keep showing up repeatedly in market volatility. The recent market correction is closely related to the escalation of the Middle East conflict. Whether the United States will start new wars in other regions and bring about new geopolitical risks in the future cannot be ruled out either.

The second risk is Iran’s blockade of the Strait of Hormuz, which keeps international oil prices at a high level. The rise in oil prices pushes up global prices, causing the timing of Federal Reserve rate cuts to be delayed again and again. In May this year, Federal Reserve Chair Powell’s term will end, and he will be replaced by Wosh, a Federal Reserve governor newly nominated by Trump. Wosh has long been known as a hawk; he advocates withdrawing liquidity through balance-sheet reduction. After Wosh takes office, when rate cuts will happen remains unknown, while balance-sheet reduction is almost certain. This will create a liquidity shock for the market. Against this backdrop, the U.S. stock market’s correction, and China’s A-share market, will be hard to escape as well.

The third risk is the possibility of a burst in the U.S. stock technology bubble. Not long ago, I connected with the well-known Wall Street figure Rogers, and Rogers said he is very concerned about the U.S. stock technology bubble. He even said he has fully exited his position in U.S. stocks, believing that if the U.S. stock technology bubble bursts, it could experience the largest drop of his lifetime. Of course, there are different viewpoints. For example, at the start of the year, when I recorded a New Year program with Dan Bin for CCTV, he was still bullish on the U.S. stock market’s “tech seven sisters.” Meanwhile, Buffett is more cautious. According to Berkshire Hathaway’s latest disclosed annual report, its cash on the books is as high as $370 billion, exceeding its equity holdings. This suggests that in Buffett’s case, amid the continued rise of U.S. stocks, he has reduced his stock position to below 50%.

Historically, after Buffett reduced his holdings significantly five times, the U.S. stock market saw large declines. As a cautious investor, Buffett typically starts trimming positions on the left side of when the market peaks. I think this year’s U.S. stock market performance may fall somewhere between the two scenarios: there may not be a crash-like selloff—after all, the U.S. “tech seven sisters” still have strong competitiveness and attract global capital inflows, so the likelihood of a crash is low; but it will also be difficult to see another big rally, because valuations are indeed at historical highs and there is the risk that performance cannot be fully realized. If the U.S. stock market experiences a major correction around mid-year, it will inevitably drag down the performance of some technology stocks in A-shares, because the chain leaders of those technology stocks are in the United States. For example, if Nvidia were to fall sharply, it would weigh on stocks in Nvidia’s industrial chain; if Tesla were to fall sharply, it would also affect the performance of stocks in Tesla’s industrial chain. This is also the risk that needs attention this year.

Of course, the biggest risk still lies in investors’ investment philosophy. If investors continue to invest by trading themes, betting on concepts, and chasing and selling based on price surges and crashes, even if the market delivers a slow bull and long bull trend, many investors will still find it hard to profit. Therefore, changing one’s investment philosophy is crucial. It’s important to start from fundamentals, allocate to well-performing sectors, good companies, and quality funds—only then can you truly seize the opportunity of this round of slow bull and long bull. I hope everyone can promptly shift their investment philosophy and pursue long-term compound growth. Einstein once said that compound interest is the greatest invention in the universe, because it can truly realize the value of time and help wealth grow on a large scale. To achieve compound growth, it is essential to adhere to the value investing philosophy with Chinese characteristics. Many investors can make triple returns in a year, but after three years they end up back at the starting point—meaning there are many people who earn 300% in a year, but few who earn 100% over three years. Duan Yongping also discussed this in an interview not long ago: in China’s A-share market, even if some people earn ten times in a single year, it’s rare for someone to earn just one time over ten years. The logic is the same. If you can’t achieve steady growth in performance and instead chase and sell based on momentum or go in the wrong direction, you may gain higher returns in the short term, but over a longer horizon you won’t be able to achieve compound growth, and wealth cannot be solidified—you may miss the opportunities brought by this bull market.

The recent market correction, on the one hand, is influenced by the escalation of conflicts in the Middle East: investors’ risk appetite has decreased, and stocks that rose significantly earlier have seen profit-taking. On the other hand, this kind of short-term adjustment has not changed the overall pattern of slow bull and long bull in China’s A-share market. Over the long term, the market is still in an upward trend. Therefore, everyone should maintain confidence and patience, and don’t overly focus on short-term market volatility. Instead, you should capture market opportunities from a long-term perspective. In addition, recently assets such as U.S. stocks, the U.S. dollar, and gold have all experienced a “triple kill” scenario, which to some extent has also affected investors’ confidence. Many investors worry that the market may undergo a large correction. When the Middle East conflict erupted earlier, I suggested that everyone cut their position size in half to respond to the market adjustment. Based on the current situation, this strategy is still effective. Once the short-term shock ends and the market adjustment is in place, everyone can, in light of their own circumstances, go bargain hunting for technology leading stocks whose adjustments are already in place, as well as quality resource stocks and dividend stocks, and seize the opportunities in the subsequent market trend.

The difficulty of making money in 2026 is increasing. Everyone must stick to fundamental research, and through industry analysis and company research, seize opportunities in good sectors and good companies. 2026 is still a year full of potential, but at the same time you must avoid the risks of relatively rapid short-term adjustments. Make plans from a mid-to-long-term perspective and maintain a good mindset—don’t be elated because of gains, and don’t be distressed because of declines—so that you can truly obtain good investment returns over the long term. (Opinions are for reference; investing involves risk, so be cautious)