OPINION: Pricing Trump into financial markets? |
The year ends with financial markets wearing two expressions at once. One is relaxed, almost festive. Equity indices hover near record highs, the Santa rally has arrived more or less on cue, and growth data has again refused to cooperate with the doomsayers. The other expression is harder to miss once you look for it.
Gold and silver continue to push into record territory, copper is having its strongest year since 2009, and major currencies are quietly registering unease that has little to do with GDP forecasts.
What, exactly, is the market trying to tell us?
Start with the surface calm. Global equities have had another strong year, buoyed by resilient growth and a belief that policy will remain broadly supportive. Investors continue to assume that earnings can muddle through, that artificial intelligence can keep margins interesting, and that rate cuts, however gradual, are still part of the furniture. On that reading, 2025 looks orderly enough. Nothing to see here.
And yet, look one layer down. Gold has climbed more than 70 percent this year, its strongest performance since the late 1970s. Silver has done even more. Copper is on track for its best year since 2009, having surged close to 40 percent. The US dollar is heading for its worst annual fall since 2017. None of this looks like a market that is content with the status quo. None of it resembles classic risk aversion either. Why would investors celebrate growth while hoarding hedges?
The explanation may lie less in macroeconomic data and more in politics. President Donald Trump’s aggressive push to reshape global trade, his fondness for tariffs as policy tools, and his repeated pressure........