January – Shine and tarnish in 31 days
Probably the most talked about asset this month was the commodity known as silver. In the first 28 days of the month, silver went up 64% and had everyone scrambling to get their hands on some. Three days later, at month end, it was down 28% from the month high. In a month and year that started with the kidnapping of a major oil producing country’s president that led to volatility in oil prices, heightened tension in the middle east, major sector rotations and divergences emerging within the AI stocks, it was no small feat.
Data source : Bloomberg
In the US, we observe trend reversals. For example, our bet that the equally weighted S&P 500 would outperform the cap weighted version is paying off. Small caps outperformed large/mega caps and value outperformed growth for the third straight month.
Some encouraging news came in as well, though the impact didn’t always translate positively. For starters, the latest inflation and labor market figures remain stable. Additionally, President Trump’s pick as new Fed chair doesn’t seem to be as much of a pawn and as dovish as many had feared. This sparked the correction on precious metals discussed further in the chart of the month section and also caused the biggest US dollar rally in 9 months.
Europe outperformed the US despite slower growth figures and a weaker outlook. The so-called industrial motor of Europe, Germany, is finally showing signs of waking up after over 2 years of recession. Nothing outstanding for the time being, Q4 2025 coming out at just 0.2%. Inflation pointed at 1.7% for the Euro area, convincingly below the 2% target for the ECB.
Emerging markets had an explosive start of the year, with the index pulling an amazing +8.85% performance. Though China’s performance was weaker than that of the other emerging economies, it continues to have very strong exports despite the tariffs and slowing growth.
Our summary recommendations
The volatility experienced this month offered once again short-lived opportunities to go into products sensitive to that parameter. The sort of product we structured trade equity upside for guaranteed coupons and downside protection. We will continue to seize such opportunities as we feel the next months will continue to be plagued by uncertainty, geopolitical risk, and major divergences in technology (more precisely AI-linked) stocks. Indeed, software stocks and credit ratings have been bullied in the past weeks, in particular in the so-called SaaS (software as a service) sub-sector, as AI may threaten their historically undisturbed lucrative business model. We are in touch with the private credit and private equity funds we work with in order to assess the exposure. We already have indications from some of them that a weight reduction took place in Q4 2025. More on that in the next insight letter.
We are also beginning to be dissatisfied with investment grade bond yields and will make this topic a central point of discussion in our upcoming investment committee meeting.
Chart of the month
There is a lot of money to be made in volatile assets such as gold, silver and bitcoin, pictured below. However, that implies timing entry and exit perfectly. Enter and exit a day late and the outcome could be catastrophic.
We had a number of interactions with peers and clients on the topic of gold and more recently silver. Our message on silver was that its rise resulted from speculation that it would catch up with gold. But this is too simplistic and simply ignoring the fundamental differences between the 2 metals. Gold has been considered a store of value ever since humanity learned how to melt it. For a while, silver was also used as such. Nowadays, however, only gold remains a widely used significant store of value. Central banks around the globe started massively buying gold from 2022 onwards, starting with emerging market countries that wanted to diversify away from the USD following the sanctions placed on Russia for their invasion of Ukraine.
Silver, on the other hand, is currently more widely used in manufacturing. And like every asset that is speculative in nature, silver’s price is dictated by supply and demand. It is hard to believe that the manufacturing demand for silver tripled in less than a year, which would have justified the price increase. Instead, speculators are driving the price up before taking massive profits, leading to major corrections in price.
Today, central banks and individuals continue to buy gold, but volatility is a reality one has to accept when investing in these assets or on the contrary, years of inactivity, as has happened in the past.
Source: Bloomberg
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