The following discussion is adapted from a January 19, 2026 conversation between two partners at iOne Capital. As part of our annual review and outlook, this episode provides a comprehensive discussion of the Trump administration’s domestic and foreign policy logic across economic, political, and social dimensions, and analyzes the implications for major asset classes.
Liu: Trump’s second term is approaching its first anniversary. Over the past year, U.S. domestic and foreign policies have undergone a meaningful shift. In this episode, we will focus on U.S. policy and its implications for global macro conditions and major asset classes.
I remember that when Trump won the election, you said the U.S. would enter a period of self-revolution and ultimately complete a transformation through turbulence. So far, that does seem to be the case. Over the past year, the U.S. has experienced various domestic and international political disruptions, but the economy and markets have broadly moved sharply higher. Third-quarter GDP growth reached 4.3%, while the real-time estimate for fourth-quarter GDP was as high as 5.3%.
Trump may appear unpredictable, unstable, or chaotic, but looking back, the policy-performance data are clearly quite strong.
Fan: Yes. When discussing U.S. policy, it is impossible not to analyze Trump. But analyzing Trump is itself highly controversial. You will find that as soon as you analyze him, whether positively or negatively, some people will immediately label you as either pro-Trump or anti-Trump in a very binary way.
Liu: Some people praise him almost unconditionally, while others despise him intensely. Some call him a fascist and imperialist, while others view him as a revolutionary hero deserving of a Nobel Prize. This kind of polarization has rarely appeared around previous presidents.
Fan: In a way, this actually confirms Trump’s success in political maneuvering. People develop such extreme views of him for two reasons.
First is the image he deliberately presents and constructs. Trump, who came from reality television and entertainment, is a media and internet celebrity genius. He understands the similarities between Western electoral politics and reality television. He knows that generating controversy attracts more attention and votes than rational expression. He can be narcissistic and arrogant, and he can also be completely shameless. He is extremely good at using exaggerated and dramatic language or gestures to amplify emotions, create controversy, capture attention, and build his personal brand.
The second reason is that most people still evaluate political issues through an ideological lens, whereas Trump may be the least traditionally ideological president in U.S. history. As a result, when people use the traditional framework for evaluating politicians — whether from the left or the right — to assess his actions, they easily conclude that he is unpredictable, incoherent, or even irrational.
To truly understand Trump’s thinking, one should not view him through the ideology of traditional politicians. Instead, one should view him through the mindset of a businessman allocating and coordinating interests. In his system, America is neither a beacon nor an empire. It is a business. His goal is to run that business well. Internal coordination or restructuring, external cooperation or threats — these are all part of the business playbook. On the surface, he may sound loud, inconsistent, and even thuggish, but his objectives are actually stable, pragmatic, and coherent.
In our previous public account post, we translated and summarized the U.S. National Security Strategy. That report is historically significant and very helpful for understanding the policy shift of this White House, both domestically and internationally.
Liu: Can you summarize the essence of the National Security Strategy in two sentences?
Fan: In short, the current U.S. administration believes that the policies adopted by the American establishment after the end of the Cold War — both domestically and externally — were based on major cognitive errors and misjudgments. The result was that the U.S. expended enormous resources without adequate returns, created a range of internal problems, and weakened its external strength. Therefore, the administration believes forceful change is necessary to prevent further deterioration.
Liu: Can you give some specific examples?
Fan: There are many examples, and we have discussed many of them before.
For instance, establishment-led globalization enriched multinational corporations and bankers, but it also caused many critical industries to move offshore, increased the financial burden on the American middle class, and created large groups of economically displaced citizens.
In that process, some countries that benefited and rose economically did not undergo the kind of systemic transformation or convergence the establishment had expected. Instead, they became powerful competitors. The result was not only a worsening of America’s trade and balance-of-payments imbalances, but also a growing threat to the U.S.-led economic and political order.
Another example is the Middle East. The U.S. once attempted to reshape local systems and ideologies by building democratic governments in the region. After consuming massive financial and resource contributions from American middle-class taxpayers, that effort ended in failure and futility. It significantly weakened America’s international credibility and triggered waves of refugees into Europe.
A third example is immigration. When domestic political conflict became polarized, politicians began to exploit and manipulate loopholes in America’s open immigration system. On the surface, they framed this in utopian language. In practice, by allowing large-scale illegal immigration and even changing the demographic composition of the U.S., they sought to gain electoral advantage. This had a clear impact on the lives of the native-born American middle class.
Liu: In the end, the logic is that America tried to change the world, but ended up hurting itself. So it is more realistic to change itself instead.
Fan: Exactly. That is the core logic of America’s search for change. It can be summarized in one sentence: the U.S. will no longer rely on the values and ideology of the American establishment to lead, construct, and maintain the global order, because doing so consumed unlimited resources and ultimately backfired. Instead, the U.S. is shifting toward prioritizing and developing the core interests of America as an ordinary nation-state. These interests include economic and technological competitiveness, domestic stability, control over critical resources, and the ability to balance geopolitical rivals.
Liu: That logic sounds clear. Put simply, it means: spend less energy managing other people’s affairs and more energy making oneself stronger. Stop acting as the global arbiter of justice and return to negotiating interests. Can we use some concrete examples to analyze this further?
Fan: We can start with geopolitics, which the media loves to discuss. Trump’s thinking has little to do with ideology. It is entirely about power and interests. The core of his foreign policy is to ensure U.S. control in key regions, protect U.S. economic interests, and weaken strategic competitors. His objectives are clear, but his methods adjust flexibly according to the situation.
Let’s look at several key areas.
First, the Russia–Ukraine war. Trump’s attempt to seek a ceasefire is not based on some ideological concept of justice. It is intended to stop the depletion of Western power, restart economic cooperation, and prevent Russia from fully falling into the orbit of another major power. He applies alternating pressure on both Russia and Ukraine to identify the “path of least resistance” toward an agreement.
Second, Venezuela. We analyzed this in our previous article. It is a highly targeted strategic operation designed to minimize costs. Trump views Venezuela as a geopolitical-security project, not a human-rights-liberation project. The objectives are to control oil resources, eliminate the root causes of illegal immigration from Latin America, and push out the geopolitical influence of certain countries. He did not seek to overthrow the current regime because he wanted to learn from the establishment’s Middle East mistakes and avoid creating a power vacuum that would generate chaos and drag the U.S. in.
Liu: Many controversies revolve around international law. Some say Trump violates international law. Others say that if international law were truly effective, a government like Maduro’s would not exist, and that human-rights liberation should be the highest priority. But neither of those frameworks reflects Trump’s thinking. His guiding principle is the management and balancing of multiple parties’ interests.
Fan: Yes. Now consider Iran. Destroying nuclear facilities was similarly a low-cost, safer, precision-strike approach. Recently, large-scale unrest has appeared in Iran. Trump verbally expressed support, but he did not immediately send troops in an attempt to replace the government. Instead, he is observing and waiting for the right timing — again learning from the establishment’s lessons in the Middle East.
Finally, Greenland and the Arctic. The objective is the same: to control new shipping routes and geopolitical territory created by climate change, and to ensure U.S. control over critical resources and geostrategic military positions.
Liu: At first, Trump used military threats. Then last weekend, he switched to threatening tariffs on NATO member states to pressure a Greenland acquisition. In the past couple of days, he wrote an astonishing letter to the Norwegian government. The rough message was: if you do not give me the Nobel Prize, then I do not care about world peace — and it is all your fault. It sounded like something written by a three-year-old child.
But based on the psychological logic we just discussed, and based on his consistent prior behavior, he is likely still trying to create leverage and uncertainty to secure more favorable negotiating conditions, particularly greater control over Greenland’s mineral resources and military position.
Fan: Exactly. Trump tends to open with “maximum pressure.” He deploys all types of threats at once, making people think he is irrational and reckless. But this is not impulsive. It is a classic pressure test from The Art of the Deal. His seemingly unpredictable rhythm is designed to accumulate calculated pressure and ultimately reach a deal favorable to the United States. If necessary, he can reverse course 180 degrees at any time.
Liu: That does seem consistent with the facts. Trump likes to be aggressive at the beginning. Whether in trade wars or other negotiations, he ultimately tends to complete deals through mutual compromise with counterparties. Wall Street’s so-called “TACO trade” is essentially making fun of this kind of realist transaction strategy.
Fan: Correct. In previous discussions, I said that, based on results, this approach is highly volatile. It works with some counterparties but has limited effect on others. Sometimes it generates clear benefits, but other times it damages his own approval rating and creates indirect harm. So his method is certainly controversial.
Personally, I do not agree with his style. I believe there are better and calmer ways to achieve strategic objectives. But that is only my subjective view. Others may believe that without maximum pressure, many obstacles cannot be broken through and objectives cannot be achieved efficiently.
In short, the more objective summary is that calculating interests, combined with blunt execution, is Trump’s consistent governing style across all policy issues.
Liu: From this perspective, we can also analyze the Trump administration’s domestic policies. For example, ideological pressure and financial audits on private schools, and the deportation of illegal immigrants. The execution process often looks very blunt and creates significant collateral damage. But supporters would argue that this reflects clear objectives and high execution efficiency.
Fan: Yes. From a broader perspective, the root cause behind this series of conflicts is the failure of overall coordination within the U.S. government. We can use illegal immigration enforcement as an example.
During the Obama era, illegal immigration policy focused mainly on restricting entry, but not heavily on deportation, because the administration had to preserve domestic political correctness. During the Biden era, the system at one point became uncontrolled. The administration allowed entry and granted legal status to millions of refugees from Venezuela and other countries. After Trump was reelected, he attempted to sharply reverse these trends. That created an imbalance.
On one hand, a significant portion of earlier illegal immigrants had already integrated into local economies and communities. Some had formed inseparable relationships with native-born Americans, including through marriage and family ties. Any attempt to deport them would inevitably meet strong resistance.
On the other hand, in normal circumstances, deporting a person from within the country requires completing various procedures, consuming time and labor resources. By contrast, illegal entry is much easier. This creates the reality that inflows are usually always greater than outflows. If the migrants who entered in large numbers during the Biden administration all had to go through these procedures before deportation, the entire immigration review system would completely seize up and collapse.
As a result, the Trump administration adopted many emergency measures and deterrence tools to achieve rapid deportation. Many of these methods are controversial and caused collateral damage. But it is undeniable that they were effective in achieving the goal of deportation. By the end of 2025, the U.S. had removed more than 2.5 million people through formal deportation and voluntary departure, including more than 600,000 formal deportations.
Liu: The U.S. population is roughly 300 million. This is close to 1% of the population. That shows the scale of the social impact.
Fan: Yes. Regardless of how people view these events, the undeniable reality is that border control and ensuring the quality of immigration have become a consensus among most citizens. The debate is about how to balance humanitarian considerations and efficiency in implementation.
The same applies to many other domestic issues. People may agree with the broad direction of change, but disagree with the specific methods — especially Trump’s methods. My assessment is that Trump’s positive contribution to America is that, as a disruptor, he successfully changed the direction of decline into which the establishment had been leading the country and restarted a new direction. The risk is that the volatility of his strategy may negatively affect relationships with allies and domestic cohesion.
At the same time, I believe these risks are manageable, because Trump, as a businessman, is ultimately a realist. He will weigh interests rationally.
Moreover, I believe future U.S. presidents are highly likely to continue along the new direction Trump opened, because that direction reflects public sentiment. But because the negative effects of Trump’s style are obvious, future presidents are likely to make the framework Trump broke and rebuilt more systematic and more compatible, thereby forming a so-called new establishment.
U.S. Domestic Economic Policy and Structural Growth Drivers
Liu: That was a fairly deep analysis. Let’s now focus on what investors care about most: the current state and direction of U.S. domestic economic policy.
Fan: Over the past year, we have repeatedly noted that the U.S. government is aiming to reshape its own economic model and structure. Over the next three to five years, and perhaps longer, the U.S. economy will enter a structural uptrend. There are four main drivers.
First, the AI and robotics revolution will penetrate the U.S. economy comprehensively. This has been discussed many times. Over the past year or so, U.S. productivity has clearly improved. Third-quarter productivity growth reached an astonishing 4.9%. Against the backdrop of large-scale deportation of illegal immigrants, demand for labor will rise further, which will further accelerate the development of AI and robotics.
Second is U.S. reindustrialization. Here, I am referring mainly to the return of high-end manufacturing and the rebuilding of manufacturing capacity critical to national security. Over the past year, Trump, using his preferred transactional approach, attracted an unprecedented scale of private and government investment. With the implementation of the Big Beautiful Bill this year, these investments appear likely to begin affecting the real economy in the first quarter.
Third is the expansion of the private sector — the so-called re-privatization of the U.S. economy. Over the past year, we have seen layoffs in the government sector and moderate employment expansion in the private sector, reflecting this process. At the same time, tax cuts and deregulation will promote private-sector development. Because of high interest rates and the impact of tariffs, industrial indicators had not recovered meaningfully in 2025, but they are now showing clear signs of rebound. We can also see this in the market: the industrial sector has significantly outperformed the S&P 500 year to date.
Fourth, the Federal Reserve is highly likely to remain in a moderate-rate environment over the next few years. At the very least, it is unlikely to enter a meaningful rate-hiking cycle. This is not because Trump’s current effort to influence the Fed will succeed. Under the U.S. system, unless Congress participates, Trump’s influence over the Fed will be limited to rhetoric. Even if he sues Fed officials under various pretexts, the courts will ultimately decide.
The main basis for the Fed entering a rate-cutting cycle is that inflation will likely remain moderate, with a low probability of a major rebound. The post-pandemic inflation shock has already faded. Among the three drivers mentioned above, some are disinflationary, such as AI and robotics, while others are inflationary, such as reindustrialization and private-sector balance-sheet expansion. But over the medium to long term, aging populations in the U.S. and globally will continue to create more deflationary pressure. That will limit the upward movement of central bank policy rates.
More importantly, the Fed has meaningful room to cut rates. If the economy weakens, the Fed has ample space to release liquidity through rate cuts and stabilize both markets and the economy.
Liu: These drivers are mutually reinforcing. For example, reindustrialization will certainly accelerate AI and robotics development. Moderate rates, tax cuts, and deregulation will also boost consumption and capital expenditure.
Fan: Exactly.
Liu: Was this policy combination developed by Trump himself?
Fan: Honestly, Trump, as someone who came from real estate, has strong business instincts and a good sense for commerce, but he does not have this level of strategic understanding. Treasury Secretary Bessent is a highly learned person, and he is also the most powerful Treasury Secretary the U.S. has had in decades. He can be seen as the architect of this policy combination.
Trump himself also trusts him deeply. During the trade war, we saw that Bessent was the main force smoothing out Trump’s volatility. That is why I often tell investors that if they want to understand U.S. economic policy, they only need to pay attention to Bessent’s interviews.
Is the U.S. Becoming Isolationist?
Liu: Some people believe the U.S. is now pursuing an isolationist policy. How do you view that?
Fan: That description is not accurate. What the U.S. is doing is prioritizing its own interests. It is not fully withdrawing from the world stage.
In fact, if we view the U.S. as an ordinary country and compare it with other countries, then across economics, trade, finance, and culture, the U.S. remains perhaps the most open and inclusive country in the world. It may be unmatched in that regard. This will likely remain true for the foreseeable future.
Many people think America has become “isolationist” only relative to the establishment-era America that exported universal values and attempted to converge the world through globalization. But we should not forget that the U.S. is first and foremost a country. Since ancient times, no country has ever successfully managed itself according to a borderless ideology. That itself is a utopian fantasy.
It is against this backdrop that the U.S. is turning around, attempting to unload the burdens it previously carried and return to being an ordinary great power.
In fact, this kind of cycle has occurred several times in America’s more than 200-year history. Historical experience shows that whenever the U.S. stops intervening in or managing global affairs and concentrates resources back on consolidating and developing its own national interests, it is precisely during those periods that America widens its lead over other countries. This is fundamentally determined by its own system and resource advantages.
Midterm Election Risk
Liu: A major uncertainty this year is the midterm election. Many reports are now saying Democrats could win by a large margin. How do you assess that trend?
Fan: It is still too early to draw conclusions. Historically, however, midterm elections have generally been unfavorable to the incumbent party. The opposition party typically gains about four Senate seats and more than 20 House seats.
Based on current market-implied probabilities, the chance of a Democratic landslide still appears relatively low. The most likely scenario is that Democrats win the House while Republicans retain the Senate.
Liu: If that happens, would it create obstacles for the administration’s policy execution?
Fan: The obstacles would be limited for core issues that have already been implemented. New policies introduced later could face resistance. But this administration has operated with very high efficiency, and its main core initiatives, such as the Big Beautiful Bill, have already been passed and implemented.
Therefore, unless Democrats win major victories in both the Senate and the House, the basic policy foundation is unlikely to change significantly.
2026 Asset-Class Outlook
Liu: With that background in place, let’s discuss what investors care about most: the outlook for major asset classes this year.
Fan: We can discuss this from two perspectives.
The first is structural trends.
First, equities. We believe U.S. equities will continue to experience a structural bull market over the next three years or longer. This will be driven mainly by three forces: the AI revolution, U.S. domestic reindustrialization, and the Fed’s rate-cutting cycle. Volatility is highly likely during this process, but as long as these three fundamental trends remain intact, every meaningful decline will present a buying opportunity.
Second, bonds. Although the U.S. fiscal deficit has increased, GDP growth has also improved, so the overall ratio remains manageable. Many institutions still believe inflation will rebound meaningfully, but we do not see such a trend. Under our baseline macro assumption of moderate inflation, long-term Treasury yields may fluctuate in a 3.5% to 5% range. That range should not have a major impact on other asset classes.
Third, gold and other precious metals. This major gold bull market has primarily been supported by global central bank buying and expectations of declining real rates. We believe the geopolitical trend is structural: the U.S. will retreat from global leadership ambitions and shift toward Western Hemisphere leadership. Therefore, the trend of central bank gold purchases is unlikely to change immediately.
As long as the Fed’s rate-cutting trend remains intact, gold has fundamental support. Given U.S. fiscal interest expenses, gold should continue to benefit from liquidity and still has room to rise. However, because gold is highly speculative, our overall positioning view is to accumulate rather than trade, while maintaining exposure within a controlled allocation.
Fourth, crypto. Although cryptocurrencies performed poorly in 2025, we remain positive on Bitcoin and Ethereum in 2026. In practice, crypto in 2025 already broke away from the traditional “four-year cycle” pattern, and it will continue to receive structural support from institutional participation. We believe Bitcoin and Ethereum could see very significant price appreciation over the next five to ten years, potentially in the range of 5x to 10x.
The second perspective is cyclical change.
Over the past few years, U.S. manufacturing and industrial activity has remained relatively weak, mainly due to high interest rates. Tariff shocks also delayed the expected recovery. In 2026, the tariff impact will be absorbed, while supportive factors from the Big Beautiful Bill — including tax cuts, deregulation, and reindustrialization — will begin to appear. Therefore, the overall industrial index, or PMI, is highly likely to recover.
Under this cyclical shift, we may see the following dynamics.
In equities, previously depressed cyclical industries and sectors sensitive to the cycle and interest rates, such as small caps, may rebound. In fact, this has already been reflected over the past two months, and the trend may continue. We are likely to see broader equity-market gains rather than a rally concentrated in only a small number of technology stocks, as was the case over the past three years.
Crypto assets may also develop positive upward momentum. Based on the 2026 environment of industrial recovery and ample liquidity, we believe crypto is highly likely to exhibit a pattern similar to gold’s previous move. In prior cycles, Bitcoin and gold also showed a pattern in which gold led the rally, reached elevated levels, and was then overtaken by a stronger Bitcoin move. This time, crypto may rise by an even larger magnitude.
Key Risks
Liu: What risks should investors pay attention to?
Fan: The Supreme Court will soon rule on tariff policy. At present, it appears highly likely that the Court will overturn the existing tariff policy. However, we expect the U.S. government to immediately invoke other statutes to continue implementing most tariff policies.
The removal of some tariffs may be positive for multinational companies. At the same time, however, if the Supreme Court overturns the existing tariff policy, previous tariffs must be refunded. That could trigger market concerns about the fiscal deficit, pushing long-term Treasury yields higher and pressuring asset valuations. We believe this type of shock is likely to be one-off and should have limited impact on medium- to long-term fundamentals.
As for Trump’s tariff threats against EU countries over Greenland, our earlier conclusion applies: the risk is manageable. For Trump, midterm-election stability is far more important than the Greenland transaction. It is foreseeable that over the next nine months, he will focus more on boosting the economy and supporting the stock market than on getting dragged into a war of attrition with other countries.
From that perspective, we believe economic overheating could also be a risk. For example, if the Fed — especially after a new chair takes office — pushes rates too low, and if this combines with the various fiscal-policy stimulus measures discussed above, asset bubbles could form. We will monitor several key sentiment indicators to assess that risk.
We believe the probability of a broad economic recession is low. Even if recession signals emerge, the Fed has ample room to cut rates, so recession-driven downside risk should be limited.
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