Navigating Change: Markets Balance Risks and Opportunities

Highlights

Tariff Strategy Faces Legal Constraints but Continues
A Supreme Court ruling has clarified and limited presidential tariff authority, introducing uncertainty over trade agreements. However, alternative legal avenues are currently allowing the policy to proceed, albeit with potentially reduced effectiveness.
AI Investment Boom Shows Signs of Financial Pressure
Massive funding rounds within the AI ecosystem itself are accelerating infrastructure buildout, but emerging stress in private credit markets raises questions about the model's sustainability.
Energy Disruptions Expose EU Political Divisions
Attacks on Russian energy infrastructure have cut oil flows to Hungary and Slovakia, triggering disputes within the EU that threaten policy cohesion and complicate joint funding efforts for Ukraine.
Gold Rally Supported by Strong Asian Demand
Strong Chinese ETF inflows, solid physical demand, and continued central-bank buying suggest gold may be preparing for a potential next upward move.
Risk Signal Remains Cautious Amid Elevated Volatility
Persistent macroeconomic and increased geopolitical risks are prompting investors to reduce overall risk exposure while increasing hedging and emphasising real-asset protection in portfolios.

Developments in Financial and Commodity Markets

A recent ruling by the US Supreme Court has limited certain aspects of President Trump’s tariff authority. However, the announcement of additional tariffs under an alternative legal framework suggests continued policy engagement. Major players within the AI ecosystem have deployed significant capital into OpenAI. The sector is increasingly reliant on private credit markets, where early signs of tighter liquidity conditions have emerged.

In Europe, discussions surrounding the “Friendship” pipeline have highlighted differing policy positions within the EU regarding energy coordination and security. Meanwhile, heightened tensions in the Middle East have contributed to increased market volatility. A prolonged escalation could increase risks to regional stability and potentially contribute to broader stagflationary pressures.

The Swiss National Bank has reported a provisional profit of around CHF 26 billion for 2025. While the number is below its record CHF 80.7 billion in 2024, it nevertheless ranks among the five highest results in its 119-year history. The outcome was driven by a CHF 36.3 billion valuation gain on the SNBʼs gold holdings, which benefitted from goldʼs sharp rise as investors sought safe havens amid global trade tensions.

This more than offset the SNBʼs loss of about CHF 9 billion on foreign currency positions — which were hit by the Swiss francʼs strength against a weaker dollar — as well as a CHF 900 million loss on local currency positions. The end-of-year result enables the SNB to pay out the maximum permitted dividend per share (CHF 15) and distribute CHF 4 billion to the government and cantons.

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After a strong yet volatile start to 2026 for commodities, Goldman Sachs assessed how active investor positioning may influence prices. The bank highlights gold as a key asset within the broader move towards hard assets, reflecting its relatively inelastic supply characteristics.

Additionally, they estimate that for each basis point increase of goldʼs share of US portfolios, the price of gold rises by about 1.5%. With US portfolio allocations to gold still quite low at only 0.2%, even small increases may provide support for elevated metals prices, introducing upside potential to its USD 5,400 December 2026 forecast.

Precious Metals and Commodities

With the Iran conflict still evolving, oilʼs path in the near-term path remains open and dependent on further developments. Precious metals may also trade sideways in the short term, as heightened equity volatility could lead some investors to adjust positions. Over the medium to long term, the broader commodities uptrend continues to be supported by structural factors.

Market Risk Signal

Gold vs stocks forecasting model

The current level of debt relative to real economic output is similar to the situation in the Germanic nations prior to the World Wars in the 1910s, and in France leading up to the French Revolution in the 1790s. In such high-debt scenarios, the likelihood of instability and a deleveraging process is greatly increased.

As gold holdings are typically not anotherʼs party’s liability, the deleveraging process has a gentler impact on gold prices than on equities. The anticipated deleveraging process can be modelled using coupled differential equations, which suggest that gold will likely outperform stocks from 2022 onwards. The model was calibrated in 2019 and has not since been adjusted for new input data.

According to the model, the peak at which economic activity assets (such as equities) will outperform gold is around Q3 2022. From that point forward, the model predicts an outperformance of gold relative to stocks (light line). When compared to real data on the stock-to-gold price ratio (dotted line), the trend of gold outperforming stocks appears to have begun early in 2022. Whether a short-term reversal will occur remains uncertain; however, the long-term trend towards stronger gold performance remains evident.