Sinolink: Escalation of US-Iran conflict reverses "weak US dollar" narrative, strong assets may help reverse market decline and indicate a bottom.

Sinolink released a research report stating that recently, global major asset classes have been under pressure. While on the surface it appears to be due to concerns about weakening demand, the core contradiction lies in the escalation of the US-Iran conflict reversing the narrative of the previous "weak dollar". The recent decline in strong assets (such as US technology) may be a sign of the market bottoming out. The report believes that the reason for the past decline in non-ferrous metals may not be due to "recession", but rather a combination of expectations of a contraction in US dollar liquidity and structural redistribution, which may be reversing in the near future. In addition, against the backdrop of escalating global energy security concerns, the unique advantages of Chinese assets are gradually becoming apparent. Sinolink's main points are as follows: Recently, global major asset classes have been under pressure due to concerns about weakening demand. However, the core contradiction lies in the escalation of the US-Iran conflict, which has reversed the narrative of the previous "weak dollar". While concerns about stagflation and recession in the global economy are surface reasons, the redistribution of US dollar liquidity in financial assets may be the driving force behind market performance. After the outbreak of the US-Iran conflict, the US has relative advantages within the global economy. The US, with a service-oriented economy, consumes traditional energy per unit GDP significantly less than other countries. Additionally, with its own advantages in oil and gas resources, the US is relatively less impacted. On the other hand, the traditional energy-consuming manufacturing sectors in the world economy, especially in areas like metals and chemicals, face greater pressure. The underperformance of global risk assets compared to US assets reflects US control over the world order. Looking ahead, it is necessary to pay attention to several variables: whether the US will lose control of the situation due to prolonged conflict with Iran, whether the conflict will affect the physical foundations of US technology (such as the supply chain of Japan and South Korea), and whether new forces will achieve some sort of breakthrough through industrial advantages. In any case, the recent decline in strong assets (US technology) may be a sign of a market bottom. The non-ferrous metals sector has faced multiple headwinds in the past, in addition to the aforementioned factors of US dollar liquidity redistribution, changes in total monetary policy expectations are also important. The current market's pricing of the Fed's monetary policy tightening is already extreme, significantly more pessimistic than the Fed's own stance, leaving room for potential correction. At the same time, US inflation is unlikely to rise significantly: US artificial intelligence suppresses wage inflation for related workers, curbing service inflation; energy consumption in personal consumption and CPI has significantly decreased; and long-term inflation expectations in the US are stable. The reasons for the past decline in non-ferrous metals may not be due to "recession", but a combination of expectations of a contraction in US dollar liquidity and structural redistribution, suggesting a possible reversal. Against the backdrop of escalating global energy security concerns, the unique advantages of Chinese assets are gradually becoming apparent. On one hand, China has a leading global coal chemical and power equipment industry chain, which not only reduces vulnerability to external shocks in energy systems but also provides energy alternatives globally. On the other hand, China's leading manufacturing companies are historically undervalued in terms of PE valuation and production capacity compared to overseas giants, with continued export growth proving the basis for reassessment. At the same time, signs of internal demand recovery in China are emerging, with export settlement possibly shifting towards domestic demand. The narrative of the rise of global physical assets has not yet ended. Only by dispelling the fog of the dollar can the truth of the world be seen. The report recommends the following: first, energy security becomes especially important in the context of global turmoil, with primary energy surpassing secondary energy construction this year. Recommendations include crude oil, oil transportation, coal, copper, aluminum, gold, and rubber; second, Chinese manufacturing is the global cornerstone, but physical movement is slower than financial asset movement, awaiting reassessment - recommendations include new energy in power equipment, machinery equipment, and chemicals; third, under the reversal of suppressing factors, structural opportunities in consumption can be found - such as tourism and scenic areas, flavor and fermentation products, beer and other alcoholic beverages, pharmaceutical business, and medical aesthetics. Risk warning: Domestic economic recovery falls short of expectations, and overseas monetary policy expectations tighten significantly.