CROSSLIGHT PERSPECTIVES — Jan 4, 2026
Week of January 4, 2026
This Week In One Paragraph
Global risk assets ended the year on a strong note, overcoming episodes of market volatility induced by geopolitical events and tariff fears. US stocks finished near their all-time highs, posting a third consecutive year of double-digit gains. However, non-US equities hogged the limelight, generating even stronger returns; their last bull-market outperformance versus the US was in 2017. Fixed-income markets echoed a similar outturn, with EM debt returns outpacing US bond returns for the first time in eight years. But the asset class that stole the show was precious metals, generating outsized full-year returns. By contrast, crude oil was the notable laggard, a trend that could persist if the US military operation in Venezuela early Saturday bolsters medium-term oil supply projections.
Looking Ahead this Week
The December employment report (consensus +59,000) on Friday will be a litmus test on US growth resilience. The 15-member UN Security Council will convene an emergency session on Monday, but a resolution is unlikely given the veto power of the five permanent members, which include the US.
Year Ahead Strategy Thoughts
The macro themes of geopolitical reconfiguration and trade tensions suggest a continuation of ongoing market trends.
● Against all odds, the global economy ended the year on a firm footing. The worst of inflation fears arising from proposed US tariffs did not materialize. Indeed, given a benign price backdrop, central banks globally — with the notable exception of Japan and Brazil — embarked on an easing cycle. No major economy suffered a recession, thanks in large part to technology capex. Consequently, financial markets as a whole appeared bulletproof to cyclical risks. All else equal, global macro trends in 2026 could mirror the experience of the past twelve months.
● That being said, secular risks are the factors to watch as it relates to relative price differences among asset classes. The US-Venezuela conflict at the start of the year increases the likelihood of an escalation in geopolitical tensions, and at a time when the post-WWII Western alliance is facing its most severe challenge. On the economic policy front, US trading partners are still managing the tariff hangover, while the imminent Fed leadership change in May remains ambiguous.
● Under a scenario where these macro risks continue to simmer but stop short of boiling over, we expect non-US assets to maintain their outperformance versus US assets, primarily on account of technical factors. US exceptionalism in the past decade has led to crowded positionings among foreign investors. By the same token, the systematic under-allocation in non-US assets due to a protracted period of underperformance, has created value opportunities elsewhere, especially in the Asia-Pacific region. In addition, narrowing interest rate differentials could reignite the home country bias of foreign players, notably Japan. Furthermore, in the wake of Western sanctions on Russia, countries with large foreign reserves are paying more attention to ensure financial sovereignty.
● In a tail scenario of maximum volatility due to either geopolitics or economics, it is possible that the historical risk-off market outcomes of dollar strength and lower yields could break down. In this environment, we expect precious metals and the Swiss franc to appeal to investors in search of time-tested safe haven assets. In particular, gold stands out as an attractive store of value with central banks and sovereign wealth funds seeking diversification out of the dollar. Among developed market currencies, the Swiss franc is a compelling choice for capital preservation, given the country’s political neutrality. In equities, defensive sectors (utilities and consumer staples) should hold up better than cyclical industries.
News Highlights:
The United States has captured Venezuela’s dictator, Nicolás Maduro — The U.S. finally acted on years of threats and removed Nicolás Maduro by force. After months of quiet military buildup, American airstrikes and a special operations raid overnight captured Maduro and flew him out of Venezuela, leaving the regime leaderless and the country in limbo. What comes next is unclear, but this is outright regime change, not sanctions or pressure by another name. (The Economist)
Trump’s momentous second year — Trump’s first year back in office has been unprecedented in speed and scope, with power consolidated rapidly across the military, law enforcement, regulators, trade policy, and even the private sector, often with little resistance. Loyalists like Pete Hegseth, deal-makers such as Steve Witkoff and Jared Kushner, and allies in business and tech have blurred the line between governance and monetization, rewarding loyalty while sidelining traditional checks. As 2026 begins, courts and some lawmakers are pushing back, but with fewer internal restraints than in Trump’s first term — and the playbook of Project 2025 in mind — the real test of America’s institutions is still ahead. (Financial Times)
Threat of California Billionaire Tax Draws Criticism From Ultrawealthy — A proposed California ballot initiative would impose a one-time 5% tax on the assets of billionaires who were state residents as of Jan. 1, triggering loud backlash from ultrawealthy investors and quiet moves to establish residency or operations elsewhere. Critics like Bill Ackman, Peter Thiel, and David Sacks warn it amounts to asset confiscation and could accelerate capital flight, while supporters argue it’s a targeted way to shore up healthcare funding amid looming federal cuts. (Wall Street Journal)
US dirty money fines drop 61% this year — U.S. fines for money laundering and sanctions violations fell 61% this year, dropping to about $1.7bn from $4.3bn in 2024, reflecting a clear shift toward lighter enforcement under Donald Trump. With regulators like the Securities and Exchange Commission taking a more business-friendly stance — especially around crypto —
Washington is quietly pulling back from its role as the world’s toughest financial cop, even as enforcement ramps up elsewhere. (Financial Times)
Foreign investment in the US — Houston has overtaken Miami as the top U.S. city for foreign multinationals, with Texas cities dominating the rankings thanks to business-friendly policies, strong logistics, and lower costs. The takeaway is straightforward: global capital is following talent, affordability, and predictability, and right now that means places like Houston, Dallas, and Austin rather than traditional coastal gateways like Miami. (Financial Times)
Gold tipped to extend record-breaking rally in 2026 — Gold had a monster 2025 (up about 64%), and an FT survey says most analysts think it keeps grinding higher in 2026 — roughly to $4,610/oz on average, with bullish calls up to $5,400. The main story is still the same: central banks (especially EM) buying, plus investors treating gold as the “trust hedge” when the dollar and policy credibility feel shaky. The catch is a lot of pros think the easy money’s been made, and 2026 could look more like choppy consolidation than another straight-line melt-up. (Financial Times)
Minnesota Fraud Scandal Challenges Gov. Tim Walz’s 2026 Re-Election Bid — A massive welfare-fraud scandal involving hundreds of millions (and possibly billions) in stolen public funds is emerging as a serious political liability for Tim Walz, giving Republicans a rare opening in a state long defined by “good government.” While Walz remains favored, the episode has dented trust, sharpened GOP attacks — including from figures tied to Donald Trump — and raised broader questions about oversight, accountability, and complacency in one-party states. (Wall Street Journal)
Americans Are Looking to the Midwest to Find Affordability — As housing and everyday costs squeeze families in coastal cities, more Americans are moving to the Midwest, where home prices sit well below the national median and wages have been rising steadily. Places like Appleton illustrate the appeal: lower housing, utilities, and insurance costs allow both locals and remote workers to buy homes and improve quality of life, even as increased demand is starting to push prices higher. (Wall Street Journal)
Listen to This: Some Audiobooks Are Outselling Hardcovers — Audiobooks have become one of the few real growth engines in publishing, with some titles now selling more in audio than in hardcover as listeners favor convenience, lower prices, and the emotional pull of strong narration, often by the authors themselves. Growth has slowed from its peak, but publishers see audio as structurally durable, even as questions loom around AI voices and what that means for authors and professional narrators. (Wall Street Journal)
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