March 2026
Theme in Focus Golden times
Beneath the surface, though, there have been vigorous rotations and even double-digit percent share-price gains in sectors like energy, basic materials, manufacturing, and utilities since the start of this year.
Anyone who had been riding the technology wave in the bull market of the last three years has had to get reaccustomed in recent months while rubbing his or her eyes in disbelief at times. The big US technology stocks have gone from being the driver of the American equity market to acting as a brake on its performance. The S&P 500 index thus has more or less been treading water since last fall. Beneath the surface, though, there have been vigorous rotations and even double-digit percent share-price gains in sectors like energy, basic materials, manufacturing, and utilities since the start of this year. At the same time, deep double-digit percent year-to-date declines have been suffered by the supposed losers of the AI revolution, led by companies in the software industry, whose stock prices have plummeted by around a third since November.
Artificial intelligence is making rapid and ever-faster advancements, raising mounting questions and concerns about its effects on job markets. A number of blog posts painting a bleak future of spiraling unemployment and widening wealth inequality for the USA have gone viral in recent weeks. Although many an analysis reveals frac-
tures in the common thread, the AI doom-and-gloom scenario cannot be denied entirely because signs of disinflationary growth devoid of job creation are definitely discernible. The public’s AI anxiety gives the White House a good reason to stimulate economic growth in this midterm election year to shore up the president’s poor approval ratings.
Golden times
Gold has held a fascination for humanity since time immemorial. In ancient Greek mythology, King Midas turned everything he touched into the yellow precious metal. Later on, the fabled golden city of El Dorado enticed Spaniards to set sail across the ocean, driven by dreams of unfathomable wealth. Another gold rush is underway today, but its causes are different than they were in previous centuries, and it has recently become a bit overheated.
of the Month
Donald Trump’s Liberation Day tariffs are unconstitutional, the US Supreme Court ruled in mid-February. An ensuing angry tweet by the president wasn’t long in coming. Just a few hours later, a new blanket 10 % punitive tariff, raised to 15 % shortly afterwards, was threatened on all imports to the USA. Although based on different legal grounds than before, the new global tariff is just as challengeable and can only be imposed for up to 150 days. It lowers the effective average tariff rate from 16 % to 13.7 %, according to calculations by Yale University. India and China rank among the winners, as they now pay lower tariffs than before. But the winners are outnumbered by losers, the ranks of which include not just businesses faced with persistent uncertainty, but also consumers. More than 90 % of the added tariff costs are being passed on to consumers, according to calculations by the New York Federal Reserve and the Kiel Institute. But hope springs eternal: officials in the White House know by now that the public loathes the tariffs and that high prices are the topic du jour. This is reason enough for Donald Trump to take liberties in enforcing the new tariff threats in the months ahead.
AI making headlines
Artificial intelligence is making rapid and ever-faster advancements, raising mounting questions and concerns about its effects on job markets. A number of blog posts painting a bleak future have gone viral in recent weeks. In a scenario put forth by Citrini Research, unemployment in the USA, for example, climbs to above 10 % by 2028 while productivity booms and income and wealth inequality drastically widens. An objective analysis uncovers fractures in the research report’s reasoning, but its conclusions cannot be denied entirely because signs of disinflationary growth devoid of job creation have indeed already been perceptible in recent quarters. A further increase in the US unemployment rate to 5 % is definitely realistic. That, coupled with a further pullback in inflation, is bound to prompt the US Federal Reserve to do more interest-rate cutting. The public’s growing AI anxiety, in turn, presents the White House with a good reason to make every effort in this midterm election year to stimulate economic growth and boost the president’s poor job approval ratings.
The economic growth outlook for Europe is brightening. After Eurozone GDP growth surprised on the upside at +0.3 % for the fourth quarter of 2025, industry surveys in recent weeks have now also been pointing to a pickup in economic activity. One major driving force behind the acceleration is government spending by Germany, which has increased significantly in the meantime, particularly in the area of defense. Meanwhile, political uncertainty has abated, as exemplified by the substantial tightening of the credit spread on French government bonds. Yet, despite the spring awakening, Europe’s outlook doesn’t augur crystal-clear sunny blue skies ahead because economic and geopolitical challenges still exist. The list of challenges includes export competition with China as well as the fact that Europe will probably reap the fruits of artificial intelligence later than the USA and that Europe’s potential growth rate will remain much lower than on the other side of the Atlantic. European policymakers’ homework diary indicates a need for further reforms – only around 15 % of the reforms recommended by the Draghi report published in autumn 2024 have been implemented thus far.
Doubts about “Sanaenomics”
In the wake of Japan having endowed its prime minister, Sanae Takaichi, with a comfortable two-thirds legislative majority, market observers are wondering how “Sanaenomics” is to be specifically formulated and implemented as a “proactive but responsible fiscal policy.” Since Japan’s public debt already amounts to 230 % of the country’s annual gross domestic product, certain concerns are not unwarranted and are being reflected by a spike in yields on the bond market and by warnings from the International Monetary Fund (IMF). Japan’s finance ministry calculates that debt-servicing costs could already take up 30 % of the country’s annual national budget three years from now. Against this backdrop, a close eye has to be kept on what degree of independence the Bank of Japan will still be allowed to exercise and to what extent Sanae will take action against a further tightening of the BoJ’s policy rate. In any event, an intervention wouldn’t be harmless because an even weaker yen, a pickup in inflation, and a much larger debt load in the long term would be inevitable, as would an angry public.
Japan’s finance ministry calculates that debtservicing costs could already take up 30 % of the country’s annual national budget three years from now. Fear on the (US) employment market | Reminiscent of an earlier bubble Expected probability of job loss in next five years (jobholders with a college degree)
Sources: University of Michigan, Kaiser Partner Privatbank
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Equities: Rotations beneath the surface
• Anyone who had been riding the technology wave in the bull market of the last three years has had to get reaccustomed in recent months while rubbing his or her eyes in disbelief at times. The big US technology stocks have gone from being the driver of the performance of the American equity market to acting as a brake on it. The S&P 500 index thus has more or less been treading water since last fall. Beneath the surface, though, there have been vigorous rotations and even double-digit percent share-price gains in sectors like energy, basic materials, manufacturing, and utilities since the start of this year. At the same time, deep double-digit percent year-to-date declines have been suffered by the supposed losers of the AI revolution, led by companies in the software industry, whose stock prices have plummeted by around a third since November. Just how jittery the markets are is also visible in the US volatility barometer. The VIX index has risen continually since the start of this year even though the broad market is trading only 2 % to 3 % below its all-time high. A similar development, albeit over a much longer time frame, was seen at the end of the 1990s. Back then, it was a harbinger of an imminent giant (Internet) asset bubble. Only the future will tell whether we are also facing a bubble right now. The fact alone that there is a
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lot of talk about a bubble at the moment is not a reason to rule it out. In this context, it may at least be reassuring that the recent correction has already reduced the Magnificent Seven’s valuation premium versus the S&P 493 to around 30 % today from a level of over 100 % in 2022.
• Excessive pessimism is also unwarranted for at least two other reasons. In the USA, on one hand, there’s a conceivable “Goldilocks” scenario in which corporate earnings (partly on the back of AI) and economic growth dynamics surprise on the upside while bond yields and inflation tend to decrease, which would give the US Federal Reserve room to further ease monetary policy. A combination of robust corporate earnings and a weakish employment market that leaves little room for wage hikes is one of the best of all worlds for the equity market.
• On the other hand, investors aren’t chained to the US equity market – anyone who is still overinvested
In the USA, on one hand, there’s a conceivable “Goldilocks” scenario in which corporate earnings (partly on the back of AI) and economic growth dynamics surprise on the upside while bond yields and inflation tend to decrease, which would give the US Federal Reserve room to further ease monetary policy.
Their outperformance may have already gone a little far from a short-term perspective, but from a bird’s-eye view, this still very young trend may just be getting started.
there should think about reallocating portfolio holdings. Developed-market countries ex-USA and emerging markets lead the year-to-date performance rankings by a substantial margin. Their outperformance may have already gone a little far from a short-term perspective, but from a bird’seye view, this still very young trend may just be getting started. US stocks still account for around two-thirds of the MSCI World index’s market capitalization. There is still enough room for a continued correction of this imbalance, particularly if the business models of the Magnificent Seven change for a long time and they lose their status as profitgenerating machines.
• Almost a year after Donald Trump’s tariff-palooza last spring, an interim conclusion can gradually be drawn with regard to inflation: US consumers have to shoulder a large part of the additional expense, yet there has not been a massive spike in inflation. Quite the contrary, in fact, US inflation data have come in surprisingly low in recent months. In January, inflation pulled back more sharply than expected to 2.4 % (forecast: 2.5 %), down from 2.7 % in December. The reaction on the bond market was a textbook outcome: yields fell and 10-year US Treasurys, for example, have recently taken aim again at the 4 % yield mark, which is a key chart level from a technical analysis standpoint. A drop to significantly below 4 % would break a triangle pattern to the downside and would surely catch numerous market observers on the wrong foot because many analysts had their eyes more on the risk of an increase in long-term interest rates in view of tariff fears and justified concerns about further expanding mountains of debt. Instead, a resumption of disinflation and further policy rate cutting starting in the second half of this year could soon become the motto. That would be good news for bond investors because it would result in price gains.
Shares of private-market asset managers such as Blackstone, Hamilton Lane, and Blue Owl have also been under selling pressure in recent weeks.
• Shares of private-market asset managers such as Blackstone, Hamilton Lane, and Blue Owl have also been under selling pressure in recent weeks. And here, too, it’s the rapid artificial intelligence advancements by OpenAI, Anthropic, and Google that have been (indirectly) causing the dislocations because many managers’ private credit funds hold not inconsiderable exposure to software companies whose business models risk being disrupted by AI chatbots and their constant new features. Investors are now questioning the intrinsic value of the credit portfolios, and many concurrently want to head for the exit and sell their shares. But in the case of semi-liquid private credit evergreen funds, that’s impossible to do by
design – redemptions are usually limited to 5 % of a fund’s asset volume per quarter. What is actually intended to protect investors is making a lot of negative headlines at the moment. But anyone who was properly advised by his or her investment consultant shouldn’t be surprised by the illiquidity of these investment vehicles. It nonetheless may make sense to recheck the exposure. Liquid alternatives (hedge funds) are an at least equally attractive substitute to private-market assets in terms of returns, with the difference that they invest primarily in liquid assets and accordingly can be liquidated quickly.
• Precious metals have stabilized in recent weeks in the aftermath of the selloff at the end of January. However, it’s questionable whether the price of gold will soon be able to resume its upward trend. A lengthier consolidation phase is more probable and would be a healthier way to take a run at new highs. Moreover, in the case of silver, it wouldn’t be surprising if its year-to-date high were to stay the record for a much longer time – the rally over the past year had all of the characteristics of a speculative binge. Investors in cryptocurrencies likewise have to exercise a lot of patience once again. Bitcoin has lost around half of its value since hitting an all-time high last October. A narrative for a new upturn is missing at the moment.
Currencies: US dollar on the verge of a comeback?
• After a dismal performance in 2025, the US dollar has been lagging behind again thus far this year. The price of the greenback is in the cellar, but so is investor sentiment toward the dollar. A variety of indicators suggest that quantitative investment strategies are currently holding massive short positions on the greenback and are betting on further dollar depreciation. And a reliable sentiment indicator also flashed in February when the US business magazine Barron’s published a requiem for the US currency as its cover story. On financial markets, oneway streets frequently turn into cul-de-sacs. Dollar bears therefore should gradually become cautious. A U-turn in the months ahead wouldn’t be surprising. There would also be good arguments for a stabilization of the US dollar. The US economy looks set to continue growing at a faster pace than the rest of the G7 in 2026. Even if the US Federal Reserve were to lower its policy rate toward 3 %, it would still be higher than the benchmark lending rates in other industrialized countries. Furthermore, additional fiscal stimulus measures, which are very likely to be forthcoming in view of the approaching midterm elections and the current US administration’s poor public approval ratings, typically work in favor of a stronger currency.
The US equity market has been lagging far behind the rest of the world since the start of this year. A closer inspection reveals that the Magnificent Seven are the main foot on the brake pedal – some of the big US tech stocks are trading 20 % to 30 % below their all-time highs from last autumn. The S&P 500 Equal Weight index, on the other hand, got off to an unusually good start to the year (in relative terms) and is already more than 4 percentage points ahead of its better-known counterpart after just the first two months of 2026. The reason why is because AI speculation appears to have petered out for now. Questions are being raised about more than just the absolute amount of investment in artificial intelligence and the circular funding structures being used in part to finance it. Shareholders are also increasingly asking which companies are enmeshed with each other and how risky such dependencies are. And last but not least, there’s also the question of whether enough money is left over for one’s own coffers. That’s because it’s already evident today that less and less money will be available in the future for shareholder-friendly stock buybacks. Whereas the companies in the S&P 500 index spent 46 % of their operating cash flow on buybacks in 2022, that figure looks set to drop to around just 15 % this year.
The fact is that gold fulfills a variety of functions without completely taking over a single specific one. It is too close to being a commodity to be considered a currency, is too similar to a currency to be a conventional commodity, and at the same time is too unproductive to be deemed a traditional asset.
Gold has held a fascination for humanity since time immemorial. In ancient Greek mythology, King Midas turned everything he touched into the yellow precious metal. Later on, the fabled golden city of El Dorado enticed Spaniards to set sail across the ocean, driven by dreams of unfathomable wealth. Another gold rush is underway today, but its causes are different than they were in previous centuries, and it has recently become a bit overheated.
What sort of asset is gold actually…
Gold plays a special role in the investment universe and defies any clear-cut classification. Is it a commodity, a currency, or more of a collector’s item? The fact is that gold fulfills a variety of functions without completely taking over a single specific one. It is too close to being a commodity to be considered a currency, is too similar to a currency to be a conventional commodity, and at the same time is too unproductive to be deemed a traditional asset. That’s because unlike stocks or real estate, gold does not generate any ongoing cash flows –neither dividends nor rent income. Without those revenue streams, a classic valuation basis is missing. Consequently, gold cannot be intrinsically valued. Its price is particularly a reflection of investors’ moods and passions and of gold’s limited supply. Since gold is an unproductive asset, some investors – including Warren Buffett – eschew the metal altogether and prefer to invest in assets that generate a cash flow. Yet, even the “Oracle of Omaha” had to stand back and watch in 2025 as gold broke one price record after another without paying any dividends at all.
…and what factors affect the price of gold?
If gold itself doesn’t yield any ongoing income returns, what then drives demand for the metal? Although many factors affect demand for gold, three main drivers stand out historically:
• Inflation: Gold acts as a store of value and as a protective shield against currency debasement, particularly in times of unexpectedly high inflation or hyperinflation. Investors flee into gold when confidence in paper currencies fades.
• Crisis fears: Since time immemorial, gold has been considered a safe haven in stormy times. Demand for the precious metal often increases during wars and political crises, which haven’t been in short supply in recent years.
• Real interest rates: The attractiveness of gold classically correlates inversely with real yields. When real yields rise substantially, the opportunity cost of holding the non-interest-bearing metal increases, putting downward pressure on the price of gold. Conversely, low or even negative real interest rates fuel demand for gold, or at least so goes the textbook logic. In recent years, though, this correlation has lost explanatory power as rising real interest rates have been accompanied periodically by a rising price of gold.
Structural changes as key drivers
Besides classical price and interest-rate factors, structural and geopolitical factors have also been gaining increasing importance and may have shifted the “new normal” for the price of gold upward. One of the core drivers is central banks. Ever since the Great Financial Crisis and even more so since 2018, central banks mainly in emerging-market countries have been amassing more and more gold, often at the expense of the US dollar. In a world of mounting geopolitical tensions and growing doubts about the dominance
of the dollar and the US Federal Reserve’s autonomy, the governments of many countries are banking on politically neutral gold free from economic sanctions and dependencies. The immense buying undertaken by the People’s Bank of China (PBoC) to build up a strategic national reserve of the precious metal is particularly relevant. China’s national gold reserves may be even larger than the PBoC’s official data suggests.
Structural private demand for gold in Asia shows a similar pattern. Households in India, for example, hold a total of around 25,000 tons of gold, which equates to approximately 16 % of total private household wealth in that country. Gold’s hedge effect against global uncertainty reduces buyers’ sensitivity to price changes and stabilizes demand. This, coupled with strong nominal growth and the cultural significance of gold jewelry, which is increasingly being used also in China as a liquid investment alternative to slumping real estate, makes Asian demand a gold-price driver not to be underestimated.
Add to that the democratization of access to gold. Whereas physical bullion bars, storage fees, and safedeposit boxes used to make it cumbersome to enter the gold market, today it takes only a few mouse clicks to acquire the yellow metal. Gold ETFs have given the general public a way to invest savings inexpensively and liquidly in the precious metal since the early 2000s, which has resulted in substantial capital inflows into gold, especially during times of elevated uncertainty.
Is gold overvalued at present?
The soaring price of gold has raised a question in the meantime even among seasoned Wall Street pros, who are asking themselves if the yellow metal is already overheated. A frequently used long-term valuation anchor looks at the price of gold in relation to the global money supply because gold has historically been considered a store of monetary value and cannot be multiplied at will. While the two variables often track together over long periods, in recent years the price of gold has risen much more sharply than the money supply. A comparison of gold with petroleum also points to an overvaluation: one ounce of gold buys around 70 barrels of crude oil today, up from an average of just 17 barrels over the last 50 years. In addition, the price of gold is currently 3 to 3.5 times higher than the cost of mining bullion. The cost of producing gold has increased in recent years, but has risen much more slowly than the price of gold has. The signs at first glance are indicative of an ambitious gold valuation at present. It should be noted, though, that the valuation metrics cited above do not represent specific models for verifying the correct price of gold, but instead act more as signals indicating an extraordinarily high price premium.
A double-digit percent weighting of gold in a portfolio would be necessary to obtain an appreciable insurance effect, but even then, there is no guarantee. The benefit of gold gets put into perspective at the
Gold in a portfolio: Insurance, an illusion, or both?
People hold gold for a variety of reasons. Whereas short-term-oriented traders bet on price movements while others view gold as a core investment to hedge against tail events like currency reforms, hyperinflation, or a financial collapse, most investors hold gold mainly for its diversifying effect. Recent years have shown that simultaneous price declines in stocks and bonds are possible. Gold can act as a valuable diversifier in situations of that kind due to its resistance to market volatility, its absence of credit and default risk, and its non-correlation with most other types of assets. However, it turns out that a golden finger in the dike is not enough. A double-digit percent weighting of gold in a portfolio would be necessary to obtain an appreciable insurance effect, but even then, there is no guarantee. The benefit of gold gets put into perspective at the portfolio level: analyses of defensive strategies show that the performance differential between portfolios with and without gold during crises amounts to just 20 basis points. Gold is thus neither a reliable driver of returns nor a magic charm against
Gold is not a silver bullet. Even if its sparkling performance over the past year may arouse a temptation to jump with both feet on the bandwagon, it’s important to take a soberly realistic view. FOMO – the fear of missing out on something – is never a good investment advisor. Anyone who bought into gold for the first time in late January had to bitterly acknowledge that. It definitely makes sense from a strategic perspective to moderately blend gold into a portfolio. But it all comes down to the right dosage: anyone already holding gold should examine what function it serves in his or her portfolio and should check if its weighting meets his or her return and risk objectives. On the heels of the stellar price gains in 2025, it may make sense to undertake a rebalancing, particularly if gold has substantially outgrown its assigned weight in a portfolio’s strategic target asset allocation.
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