Q1 2026 Market Report: De-dollarization & Global Outperformance

I hope this message finds you well. With our latest Q1 2026 Market Report, I’d like to share a brief video highlighting key economic developments and significant market shifts as we begin the new year.

Click on the video below to watch.

Key Highlights from the Q1 2026 Market Report:

Weak Job Growth, Falling Unemployment

• December: 50,000 new jobs added, below expectations of 70,000 new jobs created
• Unemployment rate fell to 4.4% from 4.5%, partly due to people leaving the labor force
• Annual inflation holding steady at 2.7%
• Partial government shutdown possible due to the upcoming January 30 funding deadline

De-dollarization Accelerates

• Countries reducing reliance on US dollar following weaponization concerns
• China’s US Treasury holdings hit September 2008 lows
• Largest European pension fund ABP cutting back on US Treasury holdings
• Danish pension fund exiting entire US Treasury position
• Triggered by attacks on Fed independence, Greenland tensions, and tariff threats

Corporate Profits vs. Worker Wages

• Corporate profits as a share of GDP have been rising steadily since the early 2000s
• Worker compensation as a percentage of GDP is declining steadily
• Decline of unions and increased corporate power, suppressing wage growth
• Creates spending constraints and affects civil cohesion

U.S. Stocks Face Headwinds

• 2025 U.S. stock return: +17.9%, led by the technology sector
• Presidential cycle suggests year two is typically the weakest (52% of the time the year is positive; +4.6% average return)
• Long-term interest rates are rising despite the Fed cuts
• US public debt highest among US, China, and Europe as percentage of GDP

Global Markets Double U.S. Performance

• Non-U.S. stocks returned +33% in 2025 vs. +17.9% for US
• Record capital flows into emerging market ETFs in recent months
• Driven by lower valuations, a weaker dollar, and the AI ecosystem in emerging Asia
• Investors seeking alternatives amid US economic and foreign policy concerns

Precious Metals Surge Continues

• 2025: Gold up +65%, Silver up +150%, Platinum up +128%
• Early 2026: Gold up +17%, Silver up +52%, Platinum up +40%
• India is selling US Treasuries and buying gold aggressively
• Gold now 14% of India’s reserves vs. 9% last year
• Central bank diversification and geopolitical tensions are driving demand

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Our Perspective

As we enter 2026, significant shifts are projected in global capital flows. The de-dollarization trend is accelerating as countries reduce US Treasury holdings in favor of gold and other assets, driven by concerns over the weaponization of the U.S. dollar and attacks on Fed independence. US government debt as a percentage of GDP now exceeds both China and Europe, constraining future policy options.

Global markets outperformed US stocks by nearly 2:1 in 2025, with record flows into emerging market ETFs reflecting investor unease with US economic and foreign policy. The presidential cycle historically suggests year two tends to be the weakest year of the four years, though other factors can override this pattern. Precious metals are experiencing extraordinary gains as central banks and investors seek safe haven alternatives to US Treasuries.

I encourage you to watch the full video for a comprehensive discussion of these trends. As always, please reach out if you’d like to review these insights further!

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