A leading chief economist has delivered a decisive bullish message, advising investors to look past the current fog of pessimism and strategically build positions over the next two to three weeks. Speaking at a major financial institution annual conference on September 10, the economist outlined his views on the ongoing AI industrial wave and provided a clear roadmap for market trends. He stated unequivocally that he is currently bullish, noting that while the fundamental backdrop remains a clear upward trend, risk appetite is hovering at low levels—a combination he views as constructive rather than concerning.

From a fundamental perspective, the economist highlighted a long-term equipment investment cycle, often referred to as the Juglar cycle, which typically spans 8-10 years. He pinpointed the current cycle's trough in the first quarter of 2021, with a subsequent recovery that gained significant momentum after the advent of ChatGPT in 2023. He cautioned that this cycle could potentially peak in the first quarter of 2028, a year that also coincides with the US presidential election, warranting careful monitoring. However, he clarified that while the peak in infrastructure investment is likely around 2028, this does not signal the end of the AI boom; rather, growth may decelerate as the focus shifts towards a surge in applications.

On the policy front, the economist observed that both China and the US are concurrently intensifying their supportive policies for AI, with a growing emphasis on industrial application. In China, the official stance positions AI as a new engine for economic growth and an accelerator for transitioning between old and new growth drivers. He also pointed to a significant structural shift: broadly defined, China's technology and advanced manufacturing sectors have now surpassed traditional industries and financials to become the largest market capitalization weight.

Discussing the liquidity environment, the economist predicted a turning point for overseas liquidity in September, which would likely pave the way for intensified easing measures in China during the fourth quarter. He drew a parallel between the current market conditions and those preceding late September 2024, citing similar sentiment and investor concerns. He anticipates that long-end US Treasury yields will likely rise initially before declining, particularly in the third quarter. Once yields retreat from their peaks, Chinese capital markets are poised to benefit from a synchronized upward push from both foreign and domestic capital.

Regarding investment strategy, the economist identified September as a prime opportunity for buying on dips. He expressed strong conviction in AI-related domestic supply chains and believes that, over the coming quarters, hard technology driven by China's import substitution and self-reliance initiatives will take center stage as the market's main protagonists. The economist provided specific guidance on where opportunities lie in both the technology and non-technology sectors, urging investors to remain focused on the medium to long term. He concluded by reinforcing that the coming two to three weeks represent a critical window to navigate through the prevailing emotional gloom and build positions in quality Chinese assets.