In 2025, the global macroeconomic landscape is being profoundly shaped by two contradictory yet intertwined forces. On one hand, high debt levels, fiscal expansion, and geopolitical frictions in major economies are driving inflationary pressures. On the other hand, "technology-driven deflation," led by AI, is emerging as a critical long-term variable reshaping the economic order.

These two opposing forces coexist and intersect, forming the backdrop of the macroeconomic environment over the next three to five years and presenting a wealth proposition that investors must address.

The NOAH | ARK H2 2025 CIO Report, released last week, presents this dynamic as the "dual pull of contradictory forces." For wealth management institutions, understanding and balancing these forces is essential to navigating uncertainty and building a resilient line of defense for generational wealth.

Looking back over recent decades, investors' primary concern has been inflation eroding asset values. Physical assets like real estate, commodities, and gold, which offer protection against currency depreciation, became core allocations. However, breakthroughs in AI, automation, robotics, biotechnology, and SaaS are now ushering in a new era of "benign deflation."

The advent of generative AI has significantly reduced the cost of accessing knowledge and intelligence; automation and robotics are diminishing the scarcity of labor; and the widespread adoption of biotech and SaaS tools is driving systemic price declines in goods and services. This is not a recession but an efficiency-driven "benign deflation." Consumer purchasing power is unleashed, elevating society's overall wealth levels.

In this context, traditional industries reliant on scarcity and cost barriers are experiencing stagnant growth, with the value logic of real estate and parts of manufacturing weakening. Conversely, companies with technological monopolies and scalability, such as Microsoft and NVIDIA, leaders in AI and semiconductors, are outperforming in a deflationary environment. Meanwhile, digital assets like Bitcoin, with their algorithmic scarcity and decentralized nature, are gaining market recognition as a new "digital gold."

The report suggests that high-net-worth investors must move beyond a singular anti-inflation mindset, gradually adopting a balanced allocation of "inflation-hedged + deflation-hedged" assets to enhance resilience against future uncertainties.

If technology represents the internal force reshaping wealth logic, geopolitics and fiscal cycles serve as the external drivers shaping the macroeconomic environment.

In 2025, the US, marked by its "reciprocal tariff policy" and the Magnificent America Act, is reinforcing manufacturing repatriation and defense spending. Tariff policies have raised global commodity costs, which has intensified supply chain frictions and reignited inflationary expectations. Other major economies are responding through rule-based competition, reciprocal measures, and strategic negotiations, ushering the global trade system into a new phase of contention.

On the fiscal front, the One Big Beautiful Bill Act (OBBBA) has added nearly US$280 billion to defense and infrastructure budgets, injecting dividends into security and infrastructure sectors. However, rising deficits are raising market concerns about debt sustainability. In monetary policy, the Federal Reserve is torn between rate cuts and combating inflation, with rare internal divisions exposing policy complexity.

During this period, sectors like defense, traditional energy, and infrastructure benefit from fiscal spending, while renewable energy and parts of healthcare face headwinds from subsidy reductions.

The Noah ARK CIO Office assesses that a trend of capital reallocation is emerging, with policy dividends presenting a significant investment opportunity in the near term.

Beyond the macroeconomic tug-of-war between inflation and deflation, the financial system itself is undergoing structural transformation.

Stablecoins are recognized for their value stability and efficiency advantages in cross-border payments and value flows compared to traditional finance, serving as a critical bridge between conventional and decentralized finance (DeFi).

More crucially, amid rising "de-dollarization" discussions, stablecoins have become a tool for the US to extend dollar credibility and engage in international competition. Simultaneously, other economies are accelerating the development of sovereign digital currencies, signaling a new strategic phase in the global financial order.

For investors, digital assets are no longer an "alternative allocation" but are gradually becoming a mainstream, indispensable component of portfolios.

The report highlights that the shifting value system embedded in digital assets may be one of the most noteworthy wealth trends of the next decade. From trading, payments, and settlements to value storage, asset ownership verification, securities issuance, and corporate governance, the rules of nearly all financial processes could be rewritten.

The dual pull of inflation and deflation is rewriting the underlying logic of capital markets. Policy expansion sustains the prosperity of the old system, while technological progress continually challenges traditional wealth paradigms. The Noah ARK CIO Office believes investors must break from outdated models, considering both types of structural opportunities in asset allocation.

Wealth management is not merely about asset allocation but the continuous evolution of perspectives. The interplay of inflation and deflation, policy and technology, old order and new paradigms create a landscape where the only certainty is uncertainty. The ongoing release of Noah ARK's CIO reports aims to provide clients with clear guidance in complex environments through forward-looking perspectives and systematic logic.

The 2025 macroeconomic scene is a battleground of competing forces. Yet, as Noah ARK emphasizes, true resilience stems from proactive thinking and diversified strategies. Understanding and embracing the dual pull of contradictory forces is a mandatory lesson for high-net-worth investors, and Noah ARK will continue to leverage its global vision and professional insights to safeguard and grow wealth in a turbulent world.