Zhejiang Merchants Securities Li Chao: Consumption is the most important countercyclical variable in 2026, bullish on A-shares.

Chief economist Li Chao of Zhejiang Merchants Securities stated that, from the overall policy orientation, it is necessary for fiscal policy in 2026 to maintain a positive stance and maintain a certain level of deficit. At the same time, from the perspective of monetary policy, there will still be room for lowering reserve requirements and interest rates under a moderately loose state. Regarding the key tasks for economic work in 2026 identified in the Central Economic Work Conference as "domestic demand," Li Chao pointed out that in terms of expanding domestic demand, more emphasis needs to be placed on the importance of consumption in 2026. In the past, the real estate sector was the main countercyclical variable in expanding domestic demand, and consumption was often regarded as a pro-cyclical variable. However, in the future, the market needs to recognize that consumption will be the most important countercyclical variable. "For the Chinese stock market in 2026, it is no longer necessary to focus specifically on interest rates, but rather pay more attention to risk appetite. If market confidence can remain relatively optimistic in the long term, the stock market still has the potential to continue the 'slow bull' trend through valuation increases," Li Chao said.