As we enter year two of the second Trump administration, the investment landscape looks nothing like what consensus expected on Inauguration Day. The prevailing bet back in January 2025 was straightforward – buy America, buy the dollar, and ride the deregulation wave. While the first part of that bet may have panned out, the rest of the world has done considerably better, with the dollar being the biggest casualty of all.
Equities: the US won, but everyone else won more
In the United States (US) the S&P 500 (an index of the 500 largest companies in the US) is up roughly 15% since mid-January 2025, and the Nasdaq has added approximately 18%. Solid returns by any measure. But those numbers pale next to what has happened elsewhere.
Europe has outpaced the US convincingly. Germany’s DAX has gained around 19%, propelled by a landmark infrastructure and defence spending commitment announced in March 2025. The United Kingdom’s (UK’s) FTSE 100 is up nearly 23%, buoyed by its heavy commodity and financial weighting. The Euro Stoxx 50 has climbed roughly 22%, and the broader MSCI ACWI ex-US ETF (which tracks the performance of 600-plus large-and mid-cap stocks in developed and emerging markets) returned a staggering 33.6% in 2025 alone – comfortably doubling the S&P 500’s gains for the calendar year. European defence names like Rheinmetall and BAE Systems have been among the biggest individual winners globally, with investors pricing in a structural uplift in military budgets across the continent.
Asia has been the standout region. Japan’s Nikkei 225 has surged to around 57,800 from roughly 39,000 at the 2025 inauguration – a gain of nearly 48%. Corporate governance reforms, Bank of Japan policy normalisation, and a weaker yen boosting exporters have all played a role, with a recent snap election, where conservative Prime Minister, Sanae Takaichi’s party secured a landslide victory, providing further momentum. Hong Kong’s Hang Seng is up approximately 37%, lifted by Beijing’s sustained stimulus push, pension fund flows into A-shares, and a broader rotation into cheaper Chinese equities. The Shanghai Composite has risen about 27%, though deflationary pressures persist – producer prices have now contracted for 40 consecutive months. South Korea’s KOSPI was the global leader for 2025, surging over 71% on the back of AI-related semiconductor demand and political stabilisation following the brief martial law episode in late 2024.
Emerging markets more broadly have also outperformed, with the iShares MSCI EM ETF (which tracks large-and mid-capitalisation emerging market equities) up around 6% from the inauguration, led by Taiwan, Chile, and Brazil. South Africa’s JSE All Share Index has also soared gaining more than 38.5% over the course of 2025, making it one of the best performing indices, globally.
In short, the US has delivered, but global diversification has been the clear winner of this cycle.
The dollar: from king to question mark
The US Dollar Index (DXY) opened 2025 at around the 108.5 level and in the year fell to around 97 – a decline of roughly 10% to 11% year-on-year. The DXY fell 9.4% in 2025, its weakest annual performance in over a decade, and has continued to drift lower into early 2026.
The first half of 2025 marked the dollar’s worst first-half performance in over 50 years. The damage was broad-based. Through September 2025, the dollar had depreciated 13.5% against the euro, nearly 14% against the Swiss franc, and over 6% against the yen. Sterling gained 10% to 12%, while a basket of major emerging-market currencies strengthened 5% to 6%. The South African rand appreciated 14% against the dollar since January 2025, making it a stand out performer in emerging market currencies.
Several forces converged. The tariff shock of Liberation Day in April 2025 raised US inflation expectations while simultaneously denting US economic growth prospects – a toxic combination. The fiscal impact of the “One Big Beautiful Bill Act” added pressure, with trillions in additional deficit spending stoking concerns about long-term sustainability. And as the Fed began cutting rates from September 2025 – three times to 3.75% by December – the yield advantage that had underpinned dollar strength for years started to narrow.
Perhaps most telling, foreign investors – who hold over $30 trillion in US assets – began hedging their dollar exposure more aggressively. Reports of Chinese regulators advising financial institutions to limit US Treasury holdings – although we are yet to see this play out to its full extent – reinforced the sense that capital was gradually rotating away from dollar-denominated assets. Some analysts have called it the end of the dollar’s structural bull cycle that began in 2010 and estimate the greenback could lose another 10% by end-2026.
For global portfolios, the currency effect has been significant. The MSCI EAFE Index – an international index giving investors exposure outside of the US – returned 23.7% in 2025, but US-based investors earned 31.2% after the dollar translation benefit. The gap of over 7% was attributable entirely to currency values.
Precious metals: the assets that captured the zeitgeist
No review of this period is complete without precious metals, which have collectively delivered one of their strongest runs in decades.
Gold has been the headline act. Hovering around $2,700/oz at the inauguration, it shot to above $5,050 today, meaning the price of gold has roughly doubled. It set over 50 all-time highs in 2025, returning more than 60% for the calendar year and surpassing $4,000/ounce for the first time in October. The drivers read like a summary of everything discussed above: geopolitical uncertainty, dollar weakness, central bank diversification – the People’s Bank of China has been buying bullion for 15 consecutive months – and a structural repricing of US policy risk, and of course speculative retail traders finding the opportunity irresistible.
Gold overtook the euro in 2025 as the world’s second most widely held reserve asset and was recognised as a Tier 1 asset in the international banking system. Year-end 2026 targets for the gold price, from major investment banks and asset managers, range from $6,100/ounce to $6,600/ounce.
Silver has arguably been even more dramatic. The metal rose roughly 147% in 2025 – its strongest annual performance since 1979 – and breached the psychologically important $100/ounce level for the first time in January 2026, briefly touching $121.88/ounce on 29 January. That spike was followed by a violent correction, with prices plunging over 35% in a matter of days as leveraged positions unwound and speculative activity – attributed largely to Chinese traders – reversed sharply. Silver has since stabilised around $82/ounce and $85/ounce, still more than double where it started in January 2025. The underlying fundamentals remain supportive; the silver market is expected to remain in structural deficit for a sixth consecutive year in 2026, with industrial demand from AI infrastructure and solar energy adding to traditional investment flows.
Platinum has completed its own breakout. After years of languishing below $1,000/ounce, the metal rose approximately 127% in 2025, climbing from around $910/ounce in January 2025, to well above $2,000/ounce in January 2026. It currently trades near $2,135/ounce. The rally has been driven by persistent supply deficits – the market is now in its sixth consecutive year of undersupply – compounded by chronic underinvestment in South African mining operations, which account for roughly 70% of global production. Investor rotation out of gold and into more “affordable” precious metals has also played a role, as has the growing recognition of platinum’s strategic importance in hydrogen fuel cell technology and the automotive catalytic converter market. Recent volatility has been notable, with prices briefly dipping below $2,000/ounce in early February before recovering, mirroring the broader profit-taking theme across the metals complex.
For commodity-exporting economies – like Australia, South Africa and Canada – the combination of elevated precious metal prices and a weaker dollar have created an unusually favourable terms-of-trade environment.
The takeaway
The Trump administration came in promising American dominance. US equities have done well, but the policy execution – particularly on trade – has been far messier than markets hoped. The result is a world where capital is flowing more evenly across regions, the dollar is no longer the automatic default, and where diversification has delivered in a way it hasn’t for years.
Several themes stand out in this environment:
- The “Buy America” trade is no longer the only game in town – European defence and infrastructure spending, Asian AI demand, and commodity-driven emerging markets have all provided compelling alternatives.
- The dollar’s decline is not just cyclical; it reflects a deeper reassessment of US fiscal credibility and policy predictability.
- Gold’s surge is both a symptom and a signal that the world is hedging against a more fragmented and uncertain global order.
The message once again remains resoundingly clear; current environment rewards diversification but punishes complacency. The dollar remains under structural pressure, but any shift in Fed expectations, a tariff escalation, or a renewed flight to safety could produce sharp reversals – giving the dollar a much-needed boost.
TURNING TO THE MARKETS
The week’s key themes:
- Treasury yields ease amid risk rotation
- Wall Street futures steady after Thursday’s steep sell-off
- Gold recovered after a steep 3% decline on Thursday
- Dollar steady ahead of today’s CPI data
Bonds
US Treasury yields eased on Thursday, with the 10-year note slipping to 4.11% – its lowest in over two months – as investors rotated out of riskier assets, particularly AI equities and precious metals. Attention now turns to today’s CPI data, which markets anticipate will show moderating inflation, potentially supporting a resumption of US Federal Reserve (Fed) rate cuts. While traders are pricing in two reductions this year, the first is not expected until the second half of the year, following robust January employment figures. Meanwhile, speculation around incoming Fed Chair, Kevin Warsh’s stance on balance sheet management continues to inject uncertainty.
In the UK, 10-year gilt yields remained subdued below 4.50% after disappointing gross domestic product (GDP) data showed just 0.1% quarterly growth in the fourth quarter of 2025, alongside contractions in industrial output and construction. The Bank of England (BoE) held rates at 3.75%, though its dovish tone reinforced expectations of further easing.
Germany’s 10-year bund yield recovered to 2.80% as markets reassessed Fed rate cut timing following strong US payroll data. European Central Bank (ECB) officials, meanwhile, signalled comfort with current inflation trajectories and the euro’s recent strength.
In South Africa, the benchmark 2035 South African Government Bond yield edged higher to approximately 7.96%, influenced by global rate movements, commodity price shifts, and domestic focus surrounding President Ramaphosa’s State of the Nation Address (SONA).
Equities
US futures found their footing after a sharp selloff saw the Dow Jones lose 1.34%, the S&P 500 decline 1.57%, and the Nasdaq fall 2.03%, driven by mounting scepticism around AI-related capital spending and its ripple effects across software, property, and transport equities. Investors now look to January’s CPI data, with consensus expecting both headline and core inflation to moderate to 2.5%. After-hours movers included semiconductor manufacturer and services provider, Applied Materials, and electric vehicle manufacturer, Rivian, on strong results, while social bookmarking platform, Pinterest, sank on a weak outlook.
The UK’s FTSE 100 slipped 0.7% from record territory as energy names, Shell and BP, miners, including Rio Tinto and Anglo American, and banks, led by Standard Chartered and HSBC, all came under pressure. Financial services firm, Schroders was a standout, jumping 28% on global asset management firm, Nuveen’s £9.9 billion takeover approach.
European indices tracked the risk-off mood, with the STOXX 50 and STOXX 600 falling 0.5% and 0.6% respectively. Financial technology company, Adyen crashed 21% on an earnings miss, while industrial technology giant, Siemens provided a rare bright spot after upgrading guidance.
South Africa’s JSE All Share is up in the region of 3.9% for the week, but off from its all-time highs of 126,936.57, extending a positive weekly run. Precious metals exposure remained a key driver, while attention centred on SONA and mixed domestic production data.
Commodities
Gold has recovered to around $4,960/ounce, rebounding from a steep 3% decline in the prior session when a broad-based market selloff prompted investors to liquidate precious metals for liquidity. The simultaneous retreat across equities pointed to widespread risk aversion, likely exacerbated by algorithmic trading. Focus now shifts to US inflation data, which could recalibrate Fed rate-cut expectations after strong January employment figures pushed the anticipated first cut from June to July. Despite the near-term volatility, gold continues to find structural support from central bank buying, currency debasement fears, and geopolitical uncertainty, though it remains on track for a modest weekly loss.
Silver stabilised near $76/ounce but faces a third consecutive weekly decline, mirroring the forced liquidation dynamics seen across asset classes. Hard asset demand amid growing concerns over fiat currency erosion continues to underpin the longer-term outlook.
Brent crude hovered around $67.50/barrel, holding near Thursday’s lows and heading for a second straight weekly drop. The International Energy Agency warned of a record surplus exceeding 3.7 million barrels per day in 2026 while lowering demand forecasts. Diplomatic overtures between the US and Iran further eased supply disruption fears, keeping downside pressure firmly in place.
Currencies
The DXY has consolidated around 97, marking a fourth consecutive session of range-bound trading ahead of January’s CPI release. Solid Non-Farm Payrolls reinforced labour market resilience, though above-forecast weekly jobless claims introduced a note of caution. Markets anticipate the Fed holding in March, with two 25-basispoint cuts expected in the second half of the year. The dollar is poised to lose over 2% against the yen this week after Prime Minister Takaichi’s decisive election win and verbal intervention from Tokyo, while the Australian dollar gained on hawkish rhetoric from the Reserve Bank of Australia.
The euro is trading just below $1.19/€, supported by ECB comfort with the currency’s recent strength and the planned early departure of dovish Bank of France Governor Villeroy de Galhau. ECB President, Christine Lagarde, reiterated confidence in the inflation trajectory.
Sterling held near $1.36/£ despite UK fourth quarter GDP growth disappointing at just 0.1%, with annual expansion slowing to 1.0% – its weakest level since mid-2024. Contractions in industrial output and construction bolstered expectations of further BoE easing from the current 3.75% rate.
The rand maintained its firmness through February, trading in the high R15.00s/$. The currency lost ground during overnight trade, driven by the market wide risk-off tone, but remains below R16.00/$ at the time of writing. Precious metals remain a critical swing factor given their 20% share of export revenue, while structural reforms, fiscal consolidation, and the South African Reserve Bank’s steady 6.75% repo rate continue to anchor investor confidence. After a decade of sub-1% average growth constrained by infrastructure decay and governance challenges, improving policy credibility is gradually shifting the narrative for the currency. Market attention now turns to the upcoming Budget expected on 25 February 2025.
*Please note that all information is at the time of writing.
Key indicators:
USD/ZAR: 16.02
EUR/ZAR: 18.99
GBP/ZAR: 21.80
GOLD: $4,966.52
BRENT CRUDE: $67.46
Sources: Bloomberg, Investing.com, Reuters, Trading Economics and TradingView.
Written by: Citadel Advisory Partner and Citadel Global Director, Bianca Botes.