Looking Back and Looking Forward
Most every major asset class rose in 2025 – a surprise to many given some of the unsettling events that have occurred over the past year. Major global equity markets posted double-digit gains. Major fixed income categories turned in comparatively modest (but positive) returns. Nothing, however, matched the unprecedented rise in precious metals, with silver taking top crown (+148% in 2025) and gold (+64%), platinum (+127%), and palladium (+78%) all performing formidably. The move in precious metals in 2025 is the most important message of the market, we believe.
Through the course of history, gold in particular has served as an inflation hedge. Today, many investors believe that unsustainable government spending and easy central bank policy will continue to erode the purchasing power of fiat currencies and thereby perpetuate inflation. Hard assets like gold can provide protection. However, this so-called debasement theory is hardly “new news”, as profligate government spending and easy central banks have been here for years.
History also shows that gold has served as a safe-haven asset in turbulent times. What do investors need safety from? Notwithstanding recent events in Venezuela and recent rhetoric on Greenland, geopolitical uncertainty is also not new news, with Russia-Ukraine and the Middle East as prime examples in recent years.
What is new, we believe, is the world view of the United States. It has evolved. The world still looks to America for leadership, but it appears to be placing somewhat less trust in the U.S. – its institutions, its currency, and its debt. If that is indeed true, we should expect the marginal buyer might continue to prefer precious metals over U.S. Treasury debt or the U.S. dollar. As a result, we don’t think the run in precious metals prices is over, though a breather might be warranted.
Despite a global backdrop that seems increasingly unstable, we don’t see an obvious catalyst to take down equity markets, in particular. Sure, we’ve seen a few blow-ups in the private credit space, recent volatility in crypto etcetera, yet markets have been able to absorb these hits and climb the wall of worry to new heights. While the multiple on the S&P 500 is high at a ~22x forward P/E, corporate earnings should grow in 2026. By mid-year, we’ll start lapping many of the tariffs that were implemented in 2025, making year-over-comparables easier for companies. AI, while bubblish, should begin to generate visible productivity gains and margin improvement for those companies that employ it well. Barring a financial accident, we expect equity markets will continue to make progress in 2026.
Our Core Model Portfolios
Because of the volatility inherent in commodity-based businesses, we tend not to hold commodity-related securities (such as those tied to precious metals) in our Income model portfolios. However, for our Moderate Capital Growth and Aggressive Capital Growth models, we continued to hold significant weight in precious metal-related securities in Q4, which served us well given their strong performance.
Q4 also saw us sustain our underweight allocation to U.S. equities and overweight allocation to non-U.S. equities (e.g. Canada, Europe, Japan, China). 2025 saw most major developed countries outperform the U.S. as far as equity market performance. We’ve said it before and we’ll do so again – this could be the early innings of a multi-year rotation away from U.S assets and into non-U.S. assets.
We have no immediate plans to make significant changes to our core models at this time. They hold well-diversified equity exposure that should drive portfolio growth, combined with the stability of short-duration bonds and precious metals assets should conditions become turbulent. In the short term, we’ll be squarely focused on what’s to come in Q1 – further geopolitical developments, Q4 company reporting season, and importantly the transition in leadership at the U.S Federal Reserve.
We wish you all the best for 2026, and we’re always here if you need us.