Anben: Major US tech stocks may become retaliatory targets in the tariff game, as they are actively increasing investment in China.

In a statement provided by the head of the diversified asset investment plan at KAMC China, Luo Xun, it is maintained that the primary purpose of the tariff policy is to strive for more favorable conditions in trade negotiations with President Trump. While the US still has an advantage in the trade war, considering that large US stocks, especially in the technology sector, have a high market share overseas, they may become targets for retaliation. Therefore, investments are being diversified into non-tech stocks in the US. At the same time, Luo Xun also mentioned an increased focus on investing in China due to its ideal position compared to other emerging markets. Furthermore, they are monitoring sectors with good fundamentals that are focused on the domestic market, such as European banks, but are still waiting for the right timing to enter the market. Luo Xun pointed out that the US's advantages in consumption, investment, reserve currency status, and military power allow it to effectively use tariffs as leverage. President Trump also plans to increase revenue and reduce the deficit through tariff policies, indicating that some tariff measures will ultimately be implemented. For countries with smaller economies and high dependence on trade, their ability to counter US tariff policies is relatively weak. Retaliatory actions may be limited, and it is expected that the cycle of "escalation, retaliation, negotiation, and easing" will continue to play out, leading to market volatility. The S&P 500 index and US bond yields will play a crucial balancing role, and any collapse on either side may force President Trump to soften his stance. From a macro perspective, tariff policies will lead to divergence in global monetary policies. The US will face the dual pressure of short-term inflation and slowing economic growth, which goes against the current loose monetary policy of the Federal Reserve. As for other economies targeted by the Trump administration, tariff measures will bring downward pressure on economic growth and inflation, possibly leading to depreciation of currencies and a return model of asset returns models. Investors are prepared for greater market volatility in the "Trump 2.0" era, taking on lower overall risks compared to 2024. Given the increased risk of global economic growth downturn in the medium term due to tariff policies, there is support for increasing investments in long-term risk assets. Given the negative impact of tariff risks on EU economic growth and inflation expectations, European government bonds are favored. The strategy of holding US dollars long-term is maintained, but has been adjusted due to the significant appreciation of the US dollar, and selectively diversified into stocks. Currently, DeepSeek's development trajectory is more in line with the optimistic expectations of the "Jevons Paradox," where efficiency improvements lead to net growth in demand. The breakthrough progress of DeepSeek challenges the overvaluation premium of US technology stocks, as the US will no longer be the sole dominant country in AI technology, especially with DeepSeek adopting an open-source model. This may increase the downside risk for large US technology stocks and trigger rotation of funds into other sectors. On the other hand, the emergence of DeepSeek has a positive impact on the market sentiment for Chinese technology stocks. Some Chinese tech giants already have the capability to build AI models comparable to DeepSeek, which is a tactical bullish factor for the MSCI China Index, especially in the current environment of undervaluation, lighter fund allocation, and a rebounding profit cycle.