Cross-Market Asset Allocation Strategy Amid Sino-US Debt Cycles and Tech Competition in 2026

Based on current market data analysis, China and the US face distinct policy environments in 2026:

• Monetary policy remains relatively prudent, focusing on resolving structural risks
• Fiscal policy emphasizes structural adjustment rather than large-scale stimulus
• Focus on AI technology development and commodity allocation opportunities

• The Federal Reserve faces pressure to cut interest rates, with signs of slowing job market
• Fiscal policy is relatively loose, and government debt continues to rise
• Long-term interest rates face upward pressure, and the dollar’s attractiveness has weakened

Current data shows that US employment rate jumped to a 3-year high, forcing the Federal Reserve to continue cutting interest rates, which may exacerbate inflation debt monetization risks [1]. Meanwhile, emerging market countries like the People’s Bank of China are accelerating foreign exchange reserve diversification and increasing gold allocation, reflecting concerns about the fragility of dollar assets [1].

Based on 2025 market data analysis [0]:

1. GLD (Gold): 61.31% cumulative return, Sharpe ratio 2.99
2. MCHI (China ETF): 29.73% cumulative return, Sharpe ratio 1.04
3. QQQ (Nasdaq): 19.90% cumulative return, Sharpe ratio 0.71
4. SPY (S&P 500): 16.12% cumulative return, Sharpe ratio 0.66

• Highest volatility: USO (Crude Oil) 30.90%
• Lowest volatility: TLT (Long-term Treasury Bonds) 12.18%
• Deepest maximum drawdown: USO (Crude Oil) -26.05%
• Strongest anti-drop performance: TLT (Long-term Treasury Bonds) -9.56%

Risk parity allocation based on inverse volatility calculation:

• TLT (Long-term Treasury Bonds): 27.66%
• GLD (Gold):17.28%
• SPY (S&P500):16.99%
• QQQ (Nasdaq):14.09%
• MCHI (China ETF):13.07%
• USO (Crude Oil):10.90%

• DBB (Industrial Metals):18.47% return, Sharpe ratio1.04
• DJP (Commodities):13.68% return, Sharpe ratio0.70
• TIP (Treasury Inflation-Protected Securities):3.24% return, Sharpe ratio0.05
• VNQ (Real Estate):0.88% return, Sharpe ratio-0.12

Recommended allocation based on inflation sensitivity analysis:

1. **TIP (Treasury Inflation-Protected Securities):**30% - Provides direct inflation protection
2. **DJP (Commodities ETF):**25% - Broad inflation hedge
3. **DBB (Industrial Metals):**15% - Manufacturing inflation protection
4. **VNQ (Real Estate):**15% - Rent income inflation protection
5. **DBA (Agricultural Products):**10% - Food inflation hedge
6. **SHV (Short-term Treasury Bonds):**5% - Liquidity management

Considering that AI companies like Waymo have reached a valuation of $100 billion [2], AI investment has become the core of tech competition. Recommendations:

• QQQ (Nasdaq): Maintain 14.09% allocation
• Focus on autonomous driving, AI infrastructure
• Pay attention to AI data center-related companies like Oracle [2]

• MCHI (China ETF):13.07% allocation
• Focus on AI applications, semiconductor localization
• Tech enterprises benefiting from China’s policy support

From correlation analysis, the correlation between SPY and QQQ is as high as0.85, and the correlation with MCHI is about0.65, which indicates that there is a certain degree of divergence between Chinese and US tech markets, providing opportunities for diversified allocation.

1. Inflation Protection Portfolio (30%):
   • TIP15% + DJP15%

2. Tech Growth Portfolio (20%):
   • QQQ14% + MCHI6%

3. Fixed Income Portfolio (10%):
   • TLT10%

1. Commodities Allocation (15%):
   • GLD8% + DBB7%

2. Emerging Market Allocation (15%):
   • MCHI7% + Other Emerging Market ETFs8%

3. Opportunity Allocation (10%):
   • Dynamically adjust based on market conditions
   • Focus on themes like AI, clean energy

• Maintain 5-10% cash or short-term Treasury bonds
• Establish a tiered liquidity management system
• Respond to sudden market fluctuations

• Use gold to hedge geopolitical risks
• Use TIPS to hedge inflation risks
• Reduce single market risk through diversification

• Reassess the macro environment quarterly
• Adjust allocation ratios based on Sino-US policy changes
• Closely monitor Fed policy shift signals

[0] Gilin API Data - Various ETF price data and statistical analysis

[1] Seeking Alpha - “2026 Market Outlook: A Time For Caution Given Megacap Weighting”, 2025-12-16

[2] Bloomberg - “Waymo Seeking Over $15 Billion at Valuation Near $100 Billion”, 2025-12-16

[3] Yahoo Finance - “2026 Gold Price Trend: Major Banks Are Bullish, Experts Say It’s Staggeringly Expensive”, 2025-12-16

[4] Seeking Alpha - “2026 S&P 500 Outlook:7,800 Target And5 Risks Markets Ignore”,2025-12-16