What Guidance Does The Economic Work Conference Offer For Cross‑Year Market Direction?

1. Policy Tone For Next Year Clarified, Cross‑Year Rally Likely To Emerge Gradually Last week’s conclusion of two major policy events—the Federal Reserve’s policy meeting and the Central Economic Work Conference—has clarified the domestic and international policy stance for the year ahead. The combined signal of relatively easier overseas policy and a domestically proactive, supportive approach establishes a constructive backdrop for risk assets, increasing the likelihood that a cross‑year market advance will unfold as consensus forms.

On the external front, the Federal Reserve delivered a dovish rate cut and resumed balance‑sheet expansion, exceeding market expectations. Markets had shifted their December outlook from “no cut” to a “hawkish cut,” yet the actual outcome proved more accommodative: a 25‑basis‑point reduction, the launch of Reserve Management Purchases (RMP) at a timing and scale beyond prior forecasts, upward revisions to GDP projections alongside lower inflation forecasts in the quarterly outlook, and Powell’s emphasis on downside labor‑market risks. The dot‑plot still signals a 25‑basis‑point easing path for 2026. Looking forward, easing appears likely to remain the dominant global theme; broader liquidity and a softer dollar should provide support to A‑shares. In the near term, the reopening of government operations and the Fed’s shift from balance‑sheet runoff to expansion are expected to materially ease previously tight funding conditions. Over the medium term, weaker economic resilience, the economy’s growing dependence on AI, and political pressures for debt relief may necessitate more aggressive easing than current guidance implies—particularly if administrative actions following leadership changes at the Fed amplify the scope and pace of accommodation.

Domestically, the Central Economic Work Conference reiterated a proactive policy stance for the coming year and introduced several new policy emphases that are likely to bolster corporate earnings and market confidence. The meeting directly addressed key challenges—deeper external headwinds, pronounced domestic supply‑demand imbalances, and concentrated risks in priority sectors—and set out a targeted policy framework of “five musts,” together with comprehensive measures for consumption, investment, new growth drivers, anti‑involution efforts, and the property sector. Since the policy pivot after last year’s September 24 meeting, authorities have placed greater emphasis on transparency and market communication, which supports expectation management and confidence stabilization and helps sustain a virtuous interaction between the real economy and capital markets.

Fiscal policy is expected to remain “more proactive,” with a moderate increase in fiscal support likely next year to aid credit‑cycle repair. The conference’s call to “maintain necessary fiscal deficits, overall debt levels and total spending” implies a deficit ratio broadly comparable to the current year, while other fiscal instruments may expand. Given the late‑2025 slowdown in credit growth caused in part by timing mismatches in government bond issuance, renewed fiscal front‑loading in the first year of the 15th Five‑Year Plan is likely to help restore domestic credit expansion.

Monetary policy will continue to be “moderately accommodative,” with renewed emphasis on flexible use of reserve‑requirement and policy‑rate tools and an explicit focus on supporting a reasonable rebound in prices. The conference’s addition of “promoting stable growth and reasonable price recovery” as a key monetary objective raises the prominence of inflation dynamics in policy deliberations. We expect nominal economic recovery and modest price increases to provide meaningful support for corporate margins and earnings, making profit recovery a central positive theme for A‑shares next year.

Taken together, the domestic and international policy mix established by these meetings creates a favorable environment for risk assets. As overseas easing becomes clearer and domestic policy sets out more explicit priorities for economic and industrial development, market consensus should coalesce and help guide the principal investment themes for the cross‑year period.

2. Implications Of The Economic Work Conference For Cross‑Year Market Structure Since late November, market leadership has narrowed, with sectors such as optical‑communication hardware driving gains amid improved demand for Google TPUs and a temporary absence of broader policy direction. With the Economic Work Conference providing clearer tasking for the year ahead, we expect the set of structural market signals to broaden. Year‑end market structure typically reflects expectations for next‑year sectoral momentum; as corporate earnings recover and the share of high‑growth industries expands, leadership should shift from a single‑sector dominance toward a more diversified advance across multiple sectors. The conference’s comprehensive focus on stabilizing growth and advancing structural transformation reinforces this outlook and should enrich the market’s structural cues.

Historical precedent shows that the conference’s priority areas often presage the following year’s market themes. Since 2012, policy emphases such as structural adjustment, entrepreneurship and innovation, supply‑side reform, and carbon‑neutral initiatives have translated into distinct market narratives. Last year’s focus on “new productive forces and anti‑involution” evolved into two of the most important A‑share themes this year.

This year’s conference highlights concentrate market guidance on AI‑related development, anti‑involution measures, new‑energy advancement, and service‑sector consumption. The conference elevated “AI+” from initial deployment to deeper expansion, signaling stronger emphasis on application‑level commercialization. With global firms increasing capital expenditure on AI, the market’s attention is shifting toward monetization of AI applications and closing the industry value chain. Under robust policy support, AI penetration across industries is expected to deepen next year, extending the AI theme further down the value chain.

The conference strengthened anti‑involution measures, moving from “comprehensive rectification” to “deep rectification” and proposing a unified national market ordinance, which underscores the policy priority. Anti‑involution has already contributed to PPI recovery and improved supply‑demand dynamics for resource commodities; with investment stabilization and major project rollouts expected next year, resource‑price support should broaden and remain an important market theme.

Policy guidance for new energy emphasized accelerating the construction of a modern energy system and planning for an energy‑power nation. Technological advances—such as power‑system upgrades driven by AI and breakthroughs in solid‑state batteries—have shifted the sector narrative from supply overhang to technology‑led growth, and next year’s industry trends are likely to strengthen further.

Service consumption remains a central policy priority for expanding domestic demand, with the conference shifting from broad expansion measures to optimizing policy implementation and unlocking service‑consumption potential. Supported by structural consumption upgrades, service consumption is positioned to become a durable engine of domestic demand and a leading area for early fundamental recovery.

Aligning these policy priorities with consensus sector forecasts for 2026, the conference’s guidance reinforces four principal growth vectors: AI‑related industries, advantaged manufacturing, anti‑involution beneficiaries, and structural recovery in domestic demand. AI trends encompass hardware (communications equipment, components, semiconductors, consumer electronics) and software applications (IT services, software development, gaming, advertising). Advantaged manufacturing includes new‑energy supply chains, defense equipment, machinery and robotics, and innovative pharmaceuticals. Anti‑involution beneficiaries span steel, building materials, chemicals, photovoltaics and aviation infrastructure. Domestic‑demand recovery is expected to favor service consumption, new consumer categories and apparel and home textiles.

In conclusion, the Economic Work Conference clarifies and strengthens the policy foundation for next year’s market themes. Proactive macro policy, targeted anti‑involution measures, service‑consumption support and investment stabilization create conditions for valuation repair in cyclical sectors such as chemicals, building materials, steel and energy metals, while technological innovation and new growth drivers—particularly AI, semiconductors, defense, innovative drugs and renewable energy—are positioned to lead the next phase of market momentum.