In 2026, the global financial markets are shrouded in a strange atmosphere of contradiction. The voices on Wall Street are no longer unified—some are optimistic about continued rate cuts, others firmly believe that interest rates have peaked, and some think political factors will rewrite everything. Behind these disagreements, a major capital shift is actually underway.

From the Federal Reserve's perspective, the situation is indeed somewhat complex. They simultaneously launched rate cuts and quantitative tightening at the end of 2025, which sounds quite accommodative. But that’s not the full story. The key lies in the upcoming "Reserve Management Purchase Mechanism" (RMP)—marketed as "hidden easing." Simply put, it is designed to meet the rigid liquidity needs of the banking system. The problem is, the Fed’s maneuvering space is squeezed in the middle: inflation remains about one percentage point above target, the labor market shows no clear signs of cooling, making further rate cuts very difficult. Meanwhile, the US fiscal deficit is at a historic high. If a closed loop forms—"the Treasury issues short-term bonds, and the Fed steps in to buy"—the independence of the central bank becomes a sensitive issue.

This also explains why Wall Street’s forecasts vary so widely. Some institutions believe there is still room for 50-75 basis points of rate cuts, while others say only one more cut might be left, and some point out that the political cycle could cause the Fed to remain on hold in the first half of the year.

At the same time, the economy itself is splitting—high-end assets and traditional manufacturing, low-end consumption are following completely different trajectories. Capital is also making choices: pulling out of overvalued tech stocks and flowing into more tangible value sectors. This is not just a style shift but a deep transformation from liquidity-driven to profit-driven markets. Those who can find balance in this split will be able to seize the advantage in 2026.