Geopolitical & Macroeconomic Landscape

• US-Ukraine Peace Talks: President Trump and Ukrainian President Zelensky reported significant progress in discussions at Mar-a-Lago aimed at ending the war. However, a final breakthrough remains elusive, with the status of the Donbas region being a key unresolved issue. European leaders are calling for a peace that preserves Ukraine's sovereignty.
• US-China Relations: A fragile trade truce heads into 2026, but multiple friction points persist. Tensions include China's ongoing restrictions on rare earth elements, US accusations of unfair trade practices in the semiconductor sector, and Chinese sanctions on US defense firms over arms sales to Taiwan. Bank of America's CEO expects a de-escalation of broad tariffs in 2026, though China remains a complex issue.
• China-Taiwan Tensions: Beijing has launched extensive military exercises around Taiwan, including live-fire drills, described as a warning. The action follows a major US arms sale to Taipei.

Market Dynamics & Asset Performance

• Precious Metals Surge: Silver and gold have reached record highs, with silver's 150 percent rally in 2025 outshining gold's 70 percent gain. The surge is driven by a weaker US dollar from Federal Reserve rate cuts and strong industrial demand for silver in solar panels, EVs, and AI data centers. Investors are cautioned about silver's characteristic high volatility, with prices recently pulling back from over USD 80 an ounce.
• Equity Market Outlook: US stock futures are slightly lower. Evercore ISI forecasts the S&P 500 could rise nearly 12 percent in 2026, driven by AI, but warns of increased volatility and potential bubble formation.
• Investment Trends: Cathie Wood's ARK funds significantly outperformed the market in 2025, with the ARK Innovation ETF up 40 percent. Recent trades indicate a strong bet on a cryptocurrency rebound and select Chinese tech giants like Alibaba for 2026.

Artificial Intelligence Sector Analysis

• Systemic Risk Warnings: Evercore ISI highlights several "red flags" for a potential AI bubble, drawing parallels to Japan's 1980s *keiretsu* and the dot-com era. Key risks include:
• A "circular AI economy" where Magnificent Seven investments in AI startups lead to excessive cross-shareholdings, with 10 percent of total equities being a major red flag.
• Deterioration in hyperscalers' balance sheets, with a flip to 10 percent net debt-to-market cap considered a yellow flag.
• Downward revisions to free cash flow, with a flip to negative FCF being a red flag.
• A drop in the aggregate interest coverage ratio from 44 times to the S&P 500 median of 10 times.
• Beyond Market Leaders: The true, widespread adoption of AI beyond data centers will be signaled by a surge in demand for chips from companies like Texas Instruments and Analog Devices, which are used in robotics and factory equipment. Nvidia's revenue is forecast to top USD 300 billion, but investor wariness about overspending is growing.
• Regulatory Scrutiny: US Senators Bernie Sanders and Katie Britt are calling for greater regulation of AI, criticizing tech leaders like Elon Musk and Jeff Bezos for using the technology to amass more wealth and power. The Justice Department is also using fraud laws to investigate corporate DEI initiatives.

Corporate & Strategic Moves

• Mergers & Acquisitions: Japan's SoftBank is in advanced talks to acquire DigitalBridge, a private equity firm focused on data centers. Indian IT provider Coforge agreed to buy US-based Encora for an enterprise value of USD 2.35 billion.
• Retail Strategy: In China, Walmart's Sam's Club is outperforming Costco by successfully positioning itself as a premium chain with a strong e-commerce presence.
• National Investment: Japan is set to nearly quadruple its budget for AI and semiconductor development to approximately USD 7.9 billion. China has launched a national venture capital fund to foster homegrown tech companies.