Our 2026 Outlook...
- Marc Bentin
- 3 days ago
- 12 min read
Updated: 6 hours ago
BentinPartner Weekly
Dear Reader,
Please find below our latest Weekly Trend Report.
Have a nice start of the week.
Marc Bentin,
Bentinpartner GmbH
2026 started on a particularly sad note, leaving us to share the pain of parents, sisters, brothers, family members and members of the Crans Montana community who were struck by the catastrophe of the bar “Constellation” caused by a criminal, motivated by the sole pursuit of profits at the expense of all other considerations.
The following day delivered another illustration that D. Trump intends to part ways with international laws (and institutions) to roll over his imperialist agenda, motivated by the sole pursuit of profits at the expense of most other considerations as well.
It is a sign of times perhaps and God knows what lies ahead in the coming days or weeks which could include the US “purchase” of Greenland (there might not be any need for military intervention there, just a price tag), additional military intervention in Mexico, or the further destabilization of regimes (Iran, Cuba). Who could better summarize the US policy stance than J. Mearsheimer in his January 5th address to the United Nations?
We shall see what the implications of these tectonic moves will bring, including for financial markets, but so far and after one week, investors remained unfazed in their all-round risk appetite, part of which, I suspect, might ultimately be severely disappointed.
The overnight news that Fed Chair J. Powell came under criminal investigation for the renovation of the Ecles building would be anecdotic if it was not combined with the above-mentioned sorry list. The timing is certainly unreal and confirmed that the Fed independence is under assault.
Rather than focusing today primarily on financial developments from the first week of the year (which is often misleading), we will present a quick overview of what happened last quarter and last year along with some our thoughts and tentative financial prognostication for 2026.
Looking back at last quarter…
Global equity markets rallied further in Q4 2025, gaining between 2% and 4% with most of them finishing the year near record highs, supported by solid earnings growth, three Fed rate cuts in Q4 and expectations that the US Federal Reserve will continue to ease in 2026. A key catalyst for last quarter’s market enthusiasm was also (if not primarily) the perception that money debasement lies around the corner to mitigate the consequences of excessive debt accumulation (which is a global and not a US phenomenon) setting the stage for almost anything trying to perform better than cash and bonds.
- Despite the longest government shutdown on record (which also delayed the publication of evidence of a weakening economic backdrop) and mounting job cuts, bulls remained in charge and investors started to diversify away from tech, which was a blessing in disguise that allowed the breadth of the equity market rally to improve. Mounting concerns about the circular financing nature in the AI ecosystem and the huge financing needs of an industry that is rich of promises but still short of profits, led ORCL, the posterchild of AI excesses, to underperform, driving its share price 20% lower from its highs sending its CDS (credit default swaps) 100bps higher, at the same time as NVDA lost all momentum “lateralizing” for most of the quarter. What started to shake off sentiment in AI (and NVDA) without taking the carpet from under it, was the 1, 2 punch from January’s China’s “Deepseek” moment (of the name of a Chinese LLM which is not only open sourced but massively cheaper than similar US offerings and which led to some quiet reduction in Capex spending from the like of META, MSFT and GOOG), compounded by the effects of Trump’s “liberation day” in April (erased by a “careful” implementation of tariffs) and finally the announcement in November that META was considering buying billions of Google TPU’s in 2027 instead of NVIDIA GPU’s, possibly heralding a long term structural change and challenge to Nvidia dominance with a competitor holding massive scale. The net effect of this was a considerable catch up from GOOG vs. Nvidia share price after GOOG was being considered as the “LAG7” among the “MAG7”. The net effect was also a more cautious attitude towards AI and tech in Q4 2025.
- In this context, European stocks outperformed the US, adding 4% over the quarter as the (mostly US) AI engine started to sputter and with investors keener to accumulate European shares in particular those from the defense (on hopes of restoring economic prosperity by developing a war economy) and banking sectors (on lower rates) while more defensive sectors with stable dividends such as healthcare also attracted more cautious investors, at the same time as stocks from the mining sector also got a jolt. The 10% USD decline boosted the return of US based investors even as it further impaired European economic competitiveness.
- China which outperformed the US for the year as a whole also suffered profit taking in Q4 2025 with a total 2% drop, driven by persistent troubles in the real estate market and shaky domestic demand. Still, over the quarter, the EM equity index outperformed the MSCI World index, supported by a strong performance in Korea (on chip demand and a trade deal with the US), Chili (as copper rallied) and double digits gains in South Africa (as the gold rally intensified).
Bond markets were mixed and in the US were marked by a further steepening of the yield curve (as long term yields refused to drop) despite easing efforts deployed by the Federal Reserve (three rate cuts in Q4 and a restarting of a QE that did not bear its name in December) on deficient foreign demand for Treasuries (de-dollarisation) and dwindling trust in the Federal Reserve to fulfill the inflation part of its dual mandate. US 10Y Treasury yields closed 5bps higher on the quarter.
Japanese bonds sold off (with 10Y JGB yields climbing 38bps to a 29 year high of 2.05%) more aggressively after Sanae Takaichi became Prime minister and promised a huge fiscal boost, the largest since Covid, which had to be seen within the context of Japan’s 250% deb/deficit ratio and with BoJ raising rates by 25bps to 0.75%.
In Europe, Italy outperformed as the ECB left rates on hold.
Credit markets in aggregate stayed mostly unchanged, as Central Banks kept their easing inclination. Still credit concerns loomed and were largely ignored, with sentiment quickly healing following the Fed rate cut and QE relaunch which revived confidence in the “Fed put.”
The dollar recovered 1% in Q4, still finishing the year with a steep 10% drop, associated to a persistent de-dollarization trend.
The real story of Q4 2025 was the stellar performance of precious metals and of silver in particular as it continued to play catch up with gold on supply/demand imbalance (silver remained in structural deficit for the fifth year) linked to critical demand coming from solar energy, EV cars, the building AI infrastructure and demand from the military complex (each missile contains and consumes 10kg of silver).
Copper and rare earth minerals also strengthened for essentially the same reasons. In contrast, oil sold off, ending the year 20% lower on expanding production from both OPEC and non-OPEC members combined with a weakening global economy.
Some thoughts and (tentative) forecasts for next year…
(1) Starting with what we would “not to buy” in 2026, we will continue to avoid medium to long duration government bonds (those exceeding two years of remaining maturity) because they are unlikely to compensate for the expected further erosion of purchasing power and from currency debasement. Even if long term yields start to decline, it will most likely result from financial repression (with QE, forced buying and additional interest rate cuts as the fast growing US $38trn US debt load can simply not afford higher rates as opposed to the situation prevailing in the 70’s), not from lower bond supply (mathematically impossible) or improving inflation dynamics which are highly unlikely in the coming year (the stabilized and even improved inflation picture of Q3 was mostly due to poor data collection during an exceptionally long US government shutdown). Even if this forecast turns out to be wrong and long-term yields start to decline, there will be better assets to own, in our view.
(2) We expect fiat currencies to continue to weaken against hard assets and in particular against precious metals. Fiat currencies remain dirty linen to varying degrees. They will continue to serve as units of accounts and as a means of exchange without serving as legitimate stores of value, in our view. This implies that we will be ready to jump horses, essentially treating currencies like hot potatoes, not to speculate but to protect ourselves. In an ideal world, our preference would be to switch the “base currency” of portfolios to gold so as to be able to express their progression (performance) in terms of number of ounces of gold, rather than a number of fiat currencies (which would imply a minimum ownership of 100% in gold or silver unless we would become bearish on them). Although neither convenient nor unacceptable in practice, this would serve as a humbling experience to count our chicken at the end of the year.
Specifically on currencies, we hold the still contrarian view that the USD is unlikely to continue to depreciate as it did last year, certainly not against the EUR which could soon start to reflect the loss of competitiveness and economic decline affecting Europe compared to the rest of the world as a result of an inept ideological framework coupled to the self-defeating foreign and economic policies pursued by the Commission. There is still hope for Europe, but it will take an urgent change at the helm of the European Commission. I would, like many others, consider Belgian Prime Minister Bart De Wever a better fit to the post, not least, for the way he defused the Euroclear poison pill and likely saved the European financial system architecture from disaster. I suppose that the four or five European languages that he masters would also qualify him for the job. But perhaps he should also be cloned to be able to continue leading his own country…
That said, the USD still holds devaluation potential vs. the Chinese currency, in our view. It may not happen fast because the Bank of China will likely resist the move but it should happen in the next year or so. Combining a bearish EURUSD view with a bearish USDCNY makes our resulting preferred exposure a long CNY vs. short EUR position and this is the one with which we have started the year, with some level of conviction, subject to technical validation.
In terms of precious metals, holding a 100% precious metals overlay will remain wishful thinking but we will stick to a 25-30% minimum allocation to precious metals. We also expect silver and even platinum now, to outperform gold, implying that we will at least own as much silver than gold (even if from a risk perspective silver is more volatile than gold). Silver remains in short supply and deficit as we outlined above and those challenging the sustainability of the silver fractional reserve system (now under threat) are not as easy targets as the Hunt Brothers who got crushed along with silver but China and even the US as a country which now consider silver as a critical metal, implying the need to hoard as opposed to export Silver. We expect dramatic further price action in silver and even possibly a default of Comex but this will not ultimately get the price of physical silver into a lasting decline in our view, quite to the contrary. The expected move is hard to quantify but we should keep in mind the ratio of Gold/Silver that exists in the earth crust which is 1/15, incidentally the same ratio that was used during the “Latin Union” in 1865. At current levels, even if we consider the recent catch-up action, Silver remains cheap from a valuation perspective in relation to gold if this ratio is any guide (currently the ratio is around 1/60 and reaching the target of 1/15 would imply, assuming the price of gold would remain unchanged at 4500, a price target at USD300 for silver. Holding a year-end target at USD100 for the ounce of silver would barely stand as an ambitious target with this perspective in mind. We also like platinum, justifying to hold a 3-5% allocation to this metal as well.
(3) The equity exposure of our portfolio consisted in 2025 of equities invested according to the Trend-following rules of DynaMo$ and DynaMo€ which are two dedicated model portfolios seeking to invest in the best trending members of the SP500 and SXXP600 respectively.
The results of the two strategies matched and even surpassed our expectations derived from a “pro forma” simulation period (that ran over the past 10 years) and accounted for most of our portfolios’ total performance in 2025 (in addition to gold and silver holdings’ performance).
We plan to do more of the same in 2026. The strategy of Trend-following holds the key advantage to be highly adaptative (by taking losses early and cutting short the left part of the portfolio returns distribution) also reducing to a minimum the human biases affecting other investment techniques and will remain best suited, in our view, to the volatile environment we expect to be confronted with in 2026.
2026 will indeed be a dangerous year for the world. We plan to keep monitoring and reporting these developments to you on a day-to-day basis and to adapt our views accordingly whilst not holding any preconceived ideas, maintaining a flexible and disciplined investment approach, and pursuing absolute more than relative return and preservation of capital as key objectives.
Over the past week, the S&P500 gained 1,6% (1,8% YTD) while the Nasdaq100 rallied 2,2% (2,0% YTD). The US small cap index rallied 4,6% (5,7% YTD, Z-score 2,1). AAPL shed -4,3% (-4,6%).
The Equally Weighed SP500 rallied 2,5% (3,2% YTD, Z-score 2,3), outperforming the S&P500 by 0,9%. The median SP500 YTD return closed the week at 2,4%.
Cboe Volatility Index dropped -0,1% (-3,1% YTD) to 14,49.
The Eurostoxx50 rallied 2,5% (3,4%, Z-score 2,2), outperforming the S&P500 by 0,9%.
Diversified EM equities (VWO) gained 0,9% (3,1%), underperforming the S&P500 by -0,7%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,8% (1,1% , Z-score 2,5) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,1% (-0,1%).
10Y US Treasuries rallied -3bps (0bps ) to 4,17%. 10Y Bunds dropped -4bps (1bps) to 2,86%. 10Y Italian BTPs rallied -12bps (-6bps) to 3,50%, outperforming Bunds by -8bps.
10Y French OAT's rallied -9bps (-4bps) to 3,52%, outperforming Bunds by -5bps.
US High Yield (HY) Average Spread over Treasuries dropped -11bps (-9bps ) to 2,57%. US Investment Grade Average OAS dropped -1bps (-1bps) to 0,83%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 0bps (-1bps) to 0,53%.
Gold rallied 2,6% (5,7%) while Silver rallied 8,2% (15,7%). Major Gold Mines (GDX) rallied 8,0% (7,9%).
Goldman Sachs Commodity Index rallied 2,3% (2,4%). WTI Crude gained 1,1% (2,6%).
Overnight in Asia…
Ø S&P future -32 points; Hong Kong +0.2%; Nikkei+1.6%
Ø US stocks dropped and Gold jumped to a record high on geopolitical concerns (and deadly troubles in Iran) and as the US Justice Department threatened the Federal Reserve with a criminal indictment, reviving concerns over its independence. D. Trump also reiterated threats to take Greenland while questioning the value of the NATO alliance, just over a week after seizing Venezuelan leader Nicolas Maduro. Silver also jumped 4%.
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