The new global market landscape after the Christmas holiday: Offshore RMB returns to the "6 era," precious metals continue to hit record highs

The Christmas holiday severely impacted global market liquidity, with major stock exchanges in the US, Hong Kong, and Europe suspending trading one after another, causing overall market activity to plummet to freezing point. However, during this seemingly calm holiday period, several decisive signals are quietly emerging.

Offshore Renminbi appreciates to a yearly high, central bank stance becomes key

Thursday (December 25) saw the most notable movement in the offshore Renminbi against the US dollar. USD/CNH briefly fell to 6.9960, breaking below the 7.0 threshold for the first time since September 2024, while USD/CNY also reached 7.0051, hitting a new low since May 2023.

Market participants point out that three main drivers are behind this appreciation: strong year-end currency conversion demand, lack of rebound momentum in external US dollar, and market consensus on Renminbi strengthening. A trader from a Chinese bank directly stated, “More market currency conversions, weaker external US dollar, and more bullish expectations are aligning.”

What’s more eye-catching is Goldman Sachs’ interpretation of the People’s Bank of China’s (PBOC) attitude. According to Goldman Sachs’ latest report, the central bank’s statements over the past few months have alternated between “resilience” and “flexibility”—this subtle language shift actually signals an important message: the PBOC may lean toward a stronger Renminbi exchange rate but also wants to avoid rapid appreciation.

Goldman Sachs economist Xinquan Chen further explained this logic: at the September 26 monetary policy committee meeting, the PBOC emphasized “enhancing exchange rate resilience”; by the November 11 report, with the dollar stabilizing around 7.10, the PBOC changed tone to “maintaining exchange rate flexibility”; and in the recent Q4 meeting minutes, the PBOC reiterated resilience. This reflects the central bank’s intention to smooth the pace of appreciation while tolerating further strengthening.

Goldman Sachs maintains three USD/CNY forecasts: 6.95, 6.90, and 6.85 at 3, 6, and 12 months respectively, and expects the PBOC to cut reserve requirements by 50 basis points and lower interest rates by 10 basis points in Q1, with another 10 basis point rate cut in Q3. In the short term, offshore Renminbi is expected to continue approaching the 7.0 mark, with the pace of appreciation depending on specific actions by major state-owned banks.

Gold and silver hit record highs again, risk aversion dominates the market

Another startling data during the holiday period comes from the precious metals market. On Friday (December 26), gold briefly surged past the $4,500 mark to $4,504, while silver rose to $73.67, both hitting new all-time highs. This rally reflects deep concerns about the global economic outlook and confirms the dollar’s weakness.

Fed rate cut expectations heat up, changing borrowing landscape for next year

Bank of America’s latest outlook presents a new view on Fed policy through 2026. The bank expects the Federal Reserve to cut interest rates twice in June and July, and forecasts the 10-year US Treasury yield to fall back to the 4%–4.25% range by year-end, with potential for further declines.

What does this mean? Overall borrowing conditions will be slightly looser than in 2024–2025, but not returning to the ultra-low interest rate era that previously fueled housing and stock market booms. In other words, 2026 will not see a “money is very cheap” golden era again.

Bank of Japan continues to signal tightening, possibly raising rates further next year

Contrasting with the easing expectations for the Fed, the Bank of Japan (BOJ) is gradually turning more hawkish. BOJ Governor Ueda Kazuo stated that Japan’s core inflation is gradually accelerating and steadily approaching the 2% target, and therefore the BOJ is prepared to continue raising interest rates.

Ueda pointed out that unless the economy faces significant negative shocks, the labor market will remain tight. Structural changes in the market are irreversible—declining working-age population means companies will inevitably face upward wage pressures. Interestingly, companies are passing on rising labor and raw material costs not only in the food sector but also in other goods and services, indicating Japan is forming a mechanism of wage and inflation rising in tandem.

Given that real interest rates remain very low, if the baseline scenario materializes, the BOJ will continue to raise rates based on economic and price improvements.

Japan’s new budget hits record high, but debt control achieves new breakthroughs

Meanwhile, Japan’s Prime Minister Fumio Kishida revealed the fiscal year budget framework starting April 2026. The new budget totals approximately 122.3 trillion yen, up about 6.3% from this fiscal year’s 115.2 trillion yen, setting a new record for initial budgets.

However, a noteworthy detail is that despite the record-high budget scale, the government has achieved a breakthrough in debt control. The new issuance of government bonds will be limited to 29.6 trillion yen, the second consecutive year below 30 trillion yen; the debt dependency ratio will decrease from 24.9% in FY2025 to 24.2%, marking the first time in 27 years to fall below 30%. Kishida believes this budget strikes a balance between fiscal discipline and strong economic growth. Following the announcement, Japan’s 40-year government bond yield fell 7 basis points to 3.62%, the lowest since November 17.

Global semiconductor sales expected to surpass $1 trillion, AI leaders continue to lead

Turning to the tech sector, Bank of America semiconductor analyst Vivek Arya issued a bold forecast: global semiconductor sales are expected to grow 30% by 2026, reaching a milestone of over $1 trillion in annual sales for the first time.

Arya’s core view is that AI development remains in the middle of a decade-long structural transformation, with the overall industry trend still upward, led by companies with clear competitive advantages. He emphasizes that companies with high gross margins and solid market positions will continue to be core targets for capital deployment.

Specifically, he named six semiconductor and AI-related companies as the most confident investment targets for 2026: NVIDIA, Broadcom, Lam Research, KLA, AMD, and Cadence Design Systems. Among them, NVIDIA and Broadcom are seen as the most certain choices due to their dominant positions in AI training chips and networking.

US stocks in 2026 unlikely to see double-digit gains again, S&P 500 target at 7400 by year-end

However, CFRA Chief Investment Strategist Sam Stovall offers a more cautious outlook for US stocks. He states that for the market to achieve double-digit gains again, all engines must run at full throttle. He projects the S&P 500 to reach 7,400 points by the end of 2026, about 7% higher than current levels.

What does this imply? While the market may continue to rise next year, downside risks are increasing, and US stocks may struggle to replicate the strong performance of 2024. This presents an interesting contrast to the continued surge in tech stocks (especially AI concept stocks)—indicating a structural divergence in the market, with the gap in returns between leading and non-leading stocks likely to widen further.

NVIDIA and Groq reach licensing agreement, competition in inference field heats up

On individual stock movements, NVIDIA recently announced a significant partnership. According to CNBC, NVIDIA has agreed to a licensing deal with AI chip startup Groq, granting access to Groq’s chip technology.

Under the agreement, NVIDIA can use Groq’s chip technology and hire its CEO Simon Edwards; Groq will continue operating as an independent company, with its cloud business remaining active; Groq’s founders Jonathan Ross, President Sunny Madra, and other engineering team members will join NVIDIA.

The background of this deal is interesting: Groq completed a $750 million funding round in September, valuing the company at $6.9 billion, more than doubling from $2.8 billion in August last year. Groq focuses on the “inference” domain, which involves responding to user requests with trained AI models. While NVIDIA dominates the market for training AI models, it faces much fiercer competition in the “inference” space, making this partnership a way for NVIDIA to fill a critical gap.