It’s A Real Asset World, Until Proven Otherwise
Well, it looks like we’re finally getting the Santa Rally to kick in after getting off to a wimpy start with the major averages closing 2025 on a four-day losing streak. Nevertheless, the S&P 500 still closed 2025 up a little more than 18% (total return), notching its third consecutive double-digit advance, but keep in mind virtually none of that gain occurred since the end of October. What’s more is that the U.S. stock performance was not nearly as broad as some commentators make it out to be, with 150 constituents within the S&P 500 actually declining for calendar year 2025.
As I type, all of the major averages are back near their all-time highs, with the S&P 500 trading at 6,917 (just a couple points below its October 2025 intraday high of 6,920), which has investors wondering if we’re finally able to break out from two months of choppy sideways action. U.S. stocks aren’t the only asset stuck in the mud, as the 10-year T-note yield has traded in a very tight trading range between 4.0%-4.20% since the beginning of September. The same goes for oil prices, with the WTI contract locked in a $55-$60 per barrel range over the past three months, despite constant adverse news. I’m in the camp that we’ll see the low in oil prices in Q1 this year, and as a result, I hold a rather constructive view on the energy sector through the balance of 2026.
Before getting too far removed from last year, I think it’s a useful exercise to look back at what did well and what performed poorly in 2025. As good as a year as it was for the S&P 500, investors willing to venture out into other areas were able to capitalize on significant levels of outperformance relative to the S&P 500. Below, I run through a list of returns from various areas, but what really stood out in last year's winners was the metals complex and equity markets outside the U.S. Despite the tariff whip being thrown around by this administration, regions like Korea, Brazil, Mexico, Canada, and even China managed to outperform the S&P 500. Even the bond market finally managed to deliver a respectable total return for capital-preservation-oriented investors. Bitcoin and oil were the underperformers that stood out the most – especially Bitcoin, given its quasi-relationship at times with gold and the Nasdaq, both of which performed strongly, yet Bitcoin declined nearly -10% in 2025.
Silver: +150.6%
Platinum: +124.3%
Van Eck Rare Earth ETF: +92.1%
Korea’s KOSPI index: +75.6%
Gold: +66.2%
Copper: +41.1%
Brazil’s Bovespa index: +34%
Mexico’s IPC index: +29.9%
Canadian TSX: +28.3%
World Ex-U.S. stocks: +28.3%
Hang Seng index: +27.8%
Japan’s Nikkei 225 index: +26.2%
U.K. FTSE 100 index: +21.5%
Nasdaq: +20.4%
World stocks: +20.3%
China’s Shanghai composite: +19.3%
Euro Stoxx 600: +16.7%
S&P 500: +16.4%
Dow Jones Industrial Average: +13%
Russell 2000: +11.3%
India’s Sensex index: +9.1%
10-Year T-note Return index: +7.7%
Bitcoin: -9.6%
WTI Oil: -20.0%
One of the most important takeaways for investors from last year's results and the first two trading days of 2026 is that real assets / natural resources continue to be an investable theme to lean into. Our work has continued to reinforce overweighting client capital to real assets over financial assets. Said differently, own scarcity over abundance – think gold over treasuries, stocks (which includes miners, heavy industry, electrification, grid infrastructure, batteries…) over bonds, assets that benefit from a unipolar World Order giving way to a multipolar world. This brings me to the events over the weekend, where the U.S. captured the illegitimate dictator of Venezuela, Nicolás Maduro, with the intent to enforce a regime shift within the region. I am by no means a geopolitical expert, nor do I have any interest in playing one, but anyone surprised by the U.S. pursuing such action isn’t paying attention. This, to me, is a continuation of the ongoing evolution of a New World Order, with China continuing to be the long-term focus of U.S. geo-strategic policy. This administration made it clear in its National Security Strategy report released in November that its focus is now squarely on shoring up the western hemisphere and addressing any security threats it sees in the region. Full stop.
We can debate any and all aspects of the strategy, tactics, and execution, but at the end of the day, all investors need to recognize is that it’s the ‘what’ that matters much more than the ‘why’. Could it be about resources and oil? Sure, that’s part of it, and that’s also why this administration continues to reference Greenland and Canada as possible 51st states. But it's also a reassertion of the Monroe Doctrine, only this time it's not a threat directed at Europe but rather against China. U.S. policy is now fully committed to policing and protecting its national security interests in North and South America (including all of its precious resources) while being willing to back away from imposing its influence on a more global scale, as it has (unsuccessfully on many occasions in the Middle East) over the past four decades.
Secretary of State Marco Rubio made this clear in his comments following this weekend's events:
“This is the Western Hemisphere. This is where we live — and we’re not going to allow the Western Hemisphere to be a base of operation for adversaries, competitors, and rivals of the United States.”
“The first steps are securing what’s in the national interest of the United States and also beneficial to the people of Venezuela, and those are the things that we’re focused on right now. No more drug trafficking. No more Iran, Hezbollah presence there. No more using the oil industry to enrich all our adversaries around the world.”
“The most immediate changes are the ones that are in the national interests of the United States. That’s why we’re involved here — because of how it applies and has a direct impact on the United States.”
“We’ve seen how our adversaries all over the world are exploiting and extracting resources from Africa, from every other country. They’re not going to do it in the Western Hemisphere. That is not going to happen under President Trump. Read our national security strategy. He is serious about it.”
“It’s running policy — the policy with regards to this. We want Venezuela to move in a certain direction because not only do we think it’s good for the people of Venezuela, it’s in our national interest.”
I think most investors understand what’s playing out, and the market reaction suggests as much. On my screen today, I see a +2.5% pop in gold (no surprise), +7% spike in silver, +4% rise in copper, a modest bid in Treasuries, and U.S. equities rallying. This combination of price moves isn’t a signal of a flight-to-safety or risk-off theme, but rather an acknowledgment that resource security, regional security, and national security all go together. The fact that equity markets around the globe are rallying as much or more than the U.S. does sends a similar message – global nationalism, where nations expand and/or shore up their own empires, is not negative for growth.
This was the case in 2025, where markets outside the U.S. generated superior returns – the MSCI All-Country World ex. U.S. ETF returned +33% for a U.S. based investor, and unless something fundamentally changes, I expect this relative outperformance to continue again in 2026. Look to Korea’s equity market as a leading indicator on this file, as more than 40% of Korea’s GDP comes from exports (semiconductors, autos, batteries, displays). When the world’s supply chains, AI capex, and manufacturing cycles are humming, you see it in the Korean KOSPI which is why Wall St. tends to use it as a leading indicator for global growth expectations.
Before readers get too carried away in thinking the investment setup is nothing but clear skies and green pastures ahead, keep in mind that U.S. equities are coming off a third consecutive year of double-digit gains. Over this span, the S&P 500 has gained more than +75%, seen the Buffett Indicator (market cap of the S&P 500 as a share of U.S. GDP) soar from 140% to over 215%, and the ten largest market cap stocks in the S&P 500 now make up nearly 40% of the index. I get a sense that many investors think double-digit annual returns are as certain as death and taxes. Well, Wall St. strategists aren’t dispelling such grandiose notions, with not one strategist calling for a down market in 2026, and the average forecast among the group are forecasting the S&P 500 to end the year at 7,986. If that ends up being the case, then it will mark a fourth consecutive year of double-digit advances (a rare feat, but not unprecedented).
I don’t have an issue with the math behind such predictions,assuming all of it holds firm. This bullish cabal is justifying itsassertions with an S&P 500 earnings profile projected to grow by 15% in 2026, after an expected 13% increase in 2025. That is a high bar, but I do think 2026 will be a year where A.I. enhances the margins and earnings profile of companies outside of the hyperscalers and semiconductor manufacturers. While this may not be great for the labor market, I’m gaining confidence that the C-suite of many Fortune 500 companies is finding waysto improve efficiency, productivity, and growth.
With that said, a fair amount of this optimism is already priced into an S&P 500 trading at a forward P/E multiple of 22.5x on estimated 2026 earnings of $306/share. Yes, the S&P 500 can appreciate double digits if earnings grow 15% and the P/E multiple stays constant, but there are a lot of other variables that impact that calculus (interest rates, Fed policy, inflation, unemployment, sentiment…). As for sentiment, the latest AAII survey shows the bear camp giving up, with bearish sentiment cascading to a 30-week low of 27%. Take this as an indication that optimism is no longer scarce, with a bullish 2026 outlook increasingly becoming the base case.
Looking ahead, our research continues to reinforce that investors stick to what has been working, i.e., equities (both U.S. and foreign), gold, copper, warming to oil and natural gas, while not being bashful about squirreling some safe capital away in mid-single-digit yielding areas of the bond market. I think 2026 sets up well for tactical investors to take advantage of a choppier environment while making a couple of alpha-generating allocation pivots. Also, I think we’re going to see a big move up in uranium prices in 2026, with many uranium miners already front-running this expectation. I think mega-cap tech continues to work, but I do believe AI sprawls out to the rest of the index as companies figure out ways to enhance and optimize their businesses. Lastly, I think inflation surprises to the downside,which relieves pressure on the Fed to stay too tight, and economic growth remains resilient. This is my base case, and subject to change when/if the facts change.
As for what investors will be paying attention to in the near term? Well, we have the December jobs data on Friday, January 9th. The Q4 earnings season kicks off on January 13th led by JPMorgan Chase, and then the FOMC meeting on January 28th. On top of that, we are likely to hear from the Supreme Court ruling on the Trump tariffs, and we will also likely find out who the next Fed Chairman will be. Action-packed to say the least, and potential catalysts for heightened volatility. This is also a mid-term election year, and more than 80% of the time, one of the two chambers tends to flip after a clean sweep by one of the parties two years prior. These midterm election years after a sweep tend to be the worst for the cycle – the historical record shows the odds of the S&P 500 advancing at all in these years is barely higher than 50%, and the average gain, once again, is held to below +5.0%.
So, while I think investors should lean into 2026 with a bullish bias, realize you’re not alone in that thinking, such an expectation is already in the price, it can stay that way as long as everything goes according to plan, but it’s the bus nobody sees coming that gets you hurt. Now is not the time or place to be overextended on risk. Be patient and wait for opportunities to come your way.
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