{Strategy} Currently, the actual holdings of this column's short-term, medium-term, and long-term securities portfolios are 50%, 37.5%, and 27.5% respectively, with market outlooks categorized as bullish, bearish, and significantly bearish. The release of U.S. economic data will of course directly affect whether the Federal Reserve decides to raise interest rates further before the end of this year. The recent escalation of tensions in the Middle East, which may prevent oil prices from falling significantly, is another matter of high market concern. Persistently high oil prices will naturally push up U.S. inflation; the International Monetary Fund forecasts overall inflation of about 3.6% in 2026, while core inflation is not expected to fall close to the 2% target until mid-2028. High oil prices, through secondary transmission via transportation and food costs, increase the risk that interest rates must remain at elevated levels at minimum. On the other hand, for the November U.S. midterm elections, the economy and cost of living have become the most pressing issues for voters. The Republican Party faces political pressure from war-driven oil price increases and subsequent inflation, threatening its control over both chambers of Congress.

    We have reason to believe that major players in the U.S. stock market have already prepared for high oil prices and the potential for rising inflation, as institutional investors and hedge funds have significantly increased their holdings in energy stocks and their ETFs this year, with some large funds even considering acquiring U.S. shale oil assets to lock in supply. Meanwhile, due to uncertainties in interest rate fluctuations and energy supply, hedge funds' net long positions in U.S. stocks have dropped to historic lows, with capital shifting from growth stocks to economically sensitive and defensive stocks. Overall, the fact that tensions in the Middle East make a significant drop in oil prices unavoidable has inevitably pushed up inflation and become a key negative factor in the midterm elections. This column believes that although major market players have already prepared for this and reduced investment risks, if the U.S.-Iran conflict escalates, it could still trigger more uncontrollable inflation and more intense market volatility, which everyone must guard against. {Chief Investment Advisor, ET and TT, Benny Leung} (Website: www.BennyLeung.com)
 
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