In 2025, many asset classes touched all-time highs multiple times during the year, each for their own reasons. S&P 500 Equities, Gold, Bitcoin, Credit markets – all touched their highest. It paid to be long and strong the markets. Retail investors continued pouring their savings into fast moving assets, driving them even higher. Geopolitical events and macro-economic trends drove worries about debasement of fiat money, and everyone wants to re-orient their portfolios towards “real” assets. We can understand such worries, given the structural quagmire in which the leading economies of the world are stuck and the erratic policies and pronouncements of their political leaders.
Current markets status
Earnings multiples for the S&P 500 equity index have reached their highs (see chart below). This may seem unintuitive in an environment where geopolitical uncertainty is extremely high. However, many investors are now worried about the value of their cash savings, and perhaps thinking that owning a piece of a leading company may well protect them from future inflation.
Not surprisingly, gold and silver are also breaking record highs. There is talk of corporate credit spreads going down to zero or below, as companies may be perceived more creditworthy than their home countries (this has happened before – with YPF vs Argentina). This is getting a bit concerning as the entire global financial system is based on trust over the fiat-currency issuers. And if there is more widespread disbelief, then asset prices could move more violently and in unpredictable ways. Eventually, that could trigger social upheavals – which is not in the interest of anyone.
Geopolitics review
Many long-term relationships between countries are getting affected by Trump’s unpredictable actions and statements. Even within the US, the stand-off with Powell and the Fed continues, raising questions about the strength of the US institutional framework that underpins the confidence of global investors. How will this situation evolve? Will the US lose the confidence of global investors? Going by the record highs in S&P 500, this doesn’t seem to be happening.
We visited the US Capitol at the start of the new year, and attended live sessions of both houses of the US Congress where we saw vigorous discussions among lawmakers. We also saw the US Supreme Court and read about the long history of democracy and the rule of law. We felt that the democratic traditions and systems in the US are too deeply embedded to be affected by the short-term vagaries of a few. A key test is the upcoming decision by the US Supreme Court in Lisa Cook’s case, which we feel will demonstrate the continued resilience of the system of balance of powers.
With nervousness about the global financial system in many people’s minds, it is key for important institutions to stand firm and continue demonstrating their commitment to the rule of law. Let’s hope for a more stable and predictable 2026.
