Investors’ Outlook: Roaring times

Roaring times

It has been a roaring start to the new year as geopolitical headlines turned the volume up, and volatility came in waves while investors digested the news flow.

Political rhetoric from the US administration has become more forceful, including attacks on the US Federal Reserve (Fed) and its leadership, which brings the longer-term risk of erosion of trust in institutional guardrails and their credibility. That concern is already reflected in a weaker US dollar and surging gold prices. The general unease was then exacerbated by comments about the US taking control of Greenland, which had investors rethinking established norms and alliances, and which escalated into additional tariff threats against European nations opposing such a move, rattling markets. Those threats were later walked back amid a “framework” for a potential future deal, and markets rebounded.

While geopolitical volatility can be unsettling, it rarely has long-term negative effects on asset-price returns. The events in Venezuela, for example, have had little market impact. They are perhaps better understood as part of a broader geopolitical realignment, like blocs and spheres of regional, political, and economic influence¹, rather than a trigger that derails markets. The strength of gold and commodities crystallizes these dynamics. We believe major emerging-market central banks will continue to increase their gold holdings along with a gradual reduction in US dollars, especially with the geopolitics currently underway.

We remain optimistic as macroeconomic conditions appear broadly supportive, even as geopolitical noise has become louder. We’re seeing a wave of stimulus that’s positive for risk assets in general, whether it’s monetary easing, widespread fiscal support ranging from the US’ “One Big Beautiful Bill”² to stimulus measures across the Eurozone, Japan, and China, or capital expenditure in artificial intelligence (AI). We find it difficult to construct a bearish view in this context.

The US economy is humming along, with robust consumer spending. We anticipate a benign environment for growth, with manageable inflation. The US labor market is something we’re keeping an eye on, though further weakening would give the Fed a reason to lower rates. We believe it will cut rates by another 50 basis points (bps) this year, with the first 25bps likely in the summer.

Vontobel’s Multi Asset Investment Committee has moved to an overweight in commodities, as we believe industrial metal prices are poised to increase amid AI-driven power demand, and that oil prices could trend higher from current lows if economic activity picks up. 

In this Investors’ Outlook, you’ll find the details of our asset allocation changes, an in-depth discussion about the feared bubble in AI, and a closer look at gold.

As we move further into 2026, we aim to help our clients drown out the noise, even in a louder world.