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Whose bingo card had 2025 up strong double-digits after a nearly -20% loss to start the year in Q1? Not us, I can tell you that! But markets have a strange way of doing the opposite, or, something that few expect. Chalk up the past 12 months as a time when great doubt existed, but even greater returns followed. Mr. Market is not an easy creature to figure out, especially over short periods of time. Yet, after 26 years staring at the financial screens, taking some lumps along the way, and carefully observing how the ups and downs materialize, has clearly helped our efforts to manage your precious assets through this madness.

So far, 2025 will go down as one of the best annual returns we have posted for clients, and the reasons why will come as no surprise to the regular readers of our commentary.

More on that in a moment.

Every day we walk in the door and scrutinize what is happening in a whole host of markets. In this, we are not alone. However, the most exciting dynamic we see today that allows us to do better than the average financial advisor is our ability to navigate markets for you independent of corporate mandates. Let me repeat that for dramatic emphasis: We are not stuck in antiquated models which may have worked well in the past, but are now severely hampered in today’s markets. For this, we are deeply thankful.

Understandably, the highly volatile markets we all experienced in 2025 have caused more than a bit of heartburn for investors. The challenge is, and will continue to be, to keep our emotions at bay, not let political opinions overshadow our market outlook, and never fall too much in love with an investment thesis. Easier said than done!

Now, onto what happened in Q4, a review of the year that was 2025, and our outlook for 2026:

Government Shutdown Volatility

The fourth quarter has seen a deluge of macro-economic developments. As such, we witnessed a lot of volatility including two quick ‘mini-corrections,’ the first of which saw the S&P 500 decline -5% and the Nasdaq -8% in November, the largest drawdown since the April Tariff-Tantrum. This decline coincided with the end of the government shutdown; therefore, likely profit taking and a classic ‘sell the news event,’ as the S&P 500 had rallied nearly +40% unabated from the April lows. Recall in our October 2025 Market Update  we wrote, “point being, there is little to no reason to factor the government shutdown into your investment thesis. In fact, it is historically statistically bullish.” So, the S&P 500 initially rallied approximately +3% while the government was shutdown, then sold off when the continuing resolution was passed, and now sits approximately +1.8% higher for the quarter. A non-event, and even in-line with its historically statistically bullish nature.

Peak Fear, Again

Readers of our Market Updates know we closely monitor CNNs Fear & Greed Index to track market sentiment and positioning. Amazingly, this Index fell to a low of 5 (out of 100) signaling Extreme Fear on November 20^th. To put this in context, after the S&P 500 had fallen -20% from peak to trough in April it registered a 3 (out of 100), which presented a multi-year buying opportunity. So, here, a -5% pullback in November registered nearly the same amount of fear. This seemed very peculiar to us and gave us confidence this was yet again another market overreaction. As of now, that has proven correct as the S&P 500 sits nearly +4.5% higher off the November lows.

Just Print the Money

Next, all eyes moved to the Federal Reserve’s December meeting where the market correctly anticipated its third 0.25% interest rate cut for the year.  As a quick history lesson, in 1977, Congress amended the Federal Reserve Act to establish the Fed’s ‘Dual Mandate’ charging the Fed with promoting maximum employment and price stability. Therefore, the Fed should make monetary policy looser if the labor market is weak and inflation is low, and vice-versa. In today’s case, the labor market is weak, but inflation is high (inflation of 2.6-3.0% as measured by the CPI vs the Fed’s 2.0% target). In this scenario, the Fed should not be cutting interest rates as inflation is still too high, yet they did so three times this year.

So, what gives? In our view, the Fed’s ‘Dual Mandate’ and its associated meetings to decide the future direction of interest rates is almost entirely a complete sideshow. As we wrote about in length last fall (October 2024 Market Update), this has been replaced by ‘Fiscal Dominance,’ meaning, the Fed must lower interest rates, not because of economic or inflationary measures, but rather to get the interest cost on the US national debt down. In the first two months of fiscal 2026, net interest expense on the national debt totaled $179 billion (over $1 trillion annualized) and is the second largest government outlay only behind Social Security. As the debt continues to go up, the Fed will continue to justify reasons to cut interest rates to attempt to get interest expense down. This is third world economics and continues to be bullish for assets such as equities and precious metals, at the expense of US Treasuries/bonds and the US dollar.

As if they needed to be even easier with their monetary policy, they also announced the return of purchasing government bonds (aka ‘Quantitative Easing’). Here, the Federal Reserve prints money and buys US Treasuries in order to also help keep interest rates down. The last time they enacted this policy was during the COVID pandemic, and before that, after the Global Financial Crisis. If you recall, these were extremely constructive times to own stocks, and we believe this time is no different. This will be a major market tailwind for 2026.

‘Gold is a 6,000-year bubble’

We found this article from the Financial Times in November 2014 where Citi’s chief economist called gold a ‘6,000-year bubble’ and ‘intrinsically useless.’ Similarly, Kurt started his career at JPMorgan Private Bank and in 2015 after a few years of commodity weakness, JPM decided to remove all commodities from client portfolios, of which, around 2% of the portfolio was in gold (not even a large enough position to matter even if gold appreciated). At the time, an ounce of gold was approximately $1,200. Fast forward 10 years later and an ounce of gold is now $4,380, up 3.7x. In fact, this even outpaced the S&P 500 by around 30%. These proved to be a many thousand-year bad call. Again, Big Wall Street continues to be well behind the curve, for a variety of reasons.

While gold rose over this 10-year period, most of its return and outperformance against the stock market occurred in the last couple of years as inflation re-emerged post-COVID and global central banks have been loose with monetary policy despite this inflation, particularly due to Fiscal Dominance. More recently, as the Kobeissi Letter points out, gold prices returned +6.0% in November, marking the 4th consecutive monthly gain. This followed +3.7% in October and +11.9% in September. Gold posted positive returns in 10 out of 11 months this year. Over this stretch, gold rallied +60.7%, on track for its best annual performance in 46 years. This would also mark the 4th-strongest year over the last 100 years, only behind 1973, 1974, and 1979.

While we continue to hold our long-term allocation to gold without interruption, we will more tactically trade additional exposure to the precious metals and mining industry. Although we are long-term bulls given all the aforementioned points, we still believe it to be a prudent approach as the sector can suffer very dramatic corrections, like we saw in October. Since then, we re-established our position in gold mining stocks where it is around our largest single investment in portfolios. While the average gold miner is up approximately +160% this year, we believe there is still plenty of room for further appreciation. Namely, that the underlying metal should continue to appreciate. Furthermore, the mining stocks are so incredibly under-owned as compared to other areas of the global stock market, as seen below. Simply, if market participants owned them in the same quantities as the 1970s, these stocks could still appreciate 5-10x.

But, Bonds

Clients of ours know we have been negative on bonds for years and have held and continue to hold little to zero bonds in client portfolios. This is for two primary reasons, first, bonds mathematically go down in value as interest rates rise, which also occurs in periods of higher inflation. Second, bonds used to have an inverse correlation to stocks, meaning, when stocks went down, your bonds typically went up providing a hedge to your portfolio; however, this relationship hasn’t held for years. In the last ten years, the interest rate on the 10-year US Treasury has approximately doubled from 2% to 4%. Over this time period, the average bond has declined approximately -12% (while gold and the S&P 500 are up more than 3x). Also, the longer dated 20-year US Treasury bond has lost a third of its value. If you owned a 20-Year US Treasury bond, you lost over -80% in the last ten years relative to if you owned the same amount in gold (chart below).

Lastly, this dynamic where bonds do not work as part of a portfolio is actually not a new phenomenon recently. As you can see in the chart below by Bank of America, they look at the traditional portfolio mix of 60% S&P 500 and 40% US Treasuries. Since 1900, there have been 6 other episodes of large underperformance of bonds which led to decades of zero portfolio returns. This is exactly what we are seeking to avoid, and instead, profit from these periods by allocating that capital to stocks and precious metals.

2026: The Year Ahead

As many readers know by now, we are not in the business of making 12-month predictions on where certain markets might be. Just look at how wrong Wall Street constantly is when spending all their time and energy coming up with various price targets (cough, cough the gold call from 2015). A futile effort, at best. Instead, we focus on what the market opportunity is today and then adjust accordingly. That said, we believe it is currently business as usual. The Fed is cutting interest rates and now is restarting Quantitative Easing, massive monetary tailwinds for the stock market and precious metals. Also, Trump will be appointing a new head of the Federal Reserve to replace Jay Powell in May. You can ensure whoever he selects will be extremely loyal to him and enact even more stimulative monetary policy (someone like current White House Economic Adviser Kevin Hassett, for example).

Bitcoin continues to confound many. Historically, Bitcoin appreciated considerably when the stock market went up and when monetary policy was loose. In fact, its returns generally are around 3x the Nasdaq. So, with the Nasdaq up +20% this year, Bitcoin ‘should’ have been up around +60%. Instead, Bitcoin is down -6%. Also, the narrative that it is ‘digital gold’ has been completely dismantled as real gold is actually up more than +60% this year…so, gold did exactly what Bitcoin should have historically done. There are some theories that quantum computing could crack the Bitcoin blockchain rendering it worthless. Perhaps, a valid concern, in our view. More clarity will need to be seen for us to be involved next year.

Lastly, we will leave you with the chart below of the purchasing power of the US dollar since 1910 (‘ironically,’ also right around the time the Federal Reserve was created in 1913). Own assets or get left behind.