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Craig Farley of Team Asset Management offers this week’s review of the global markets
MAJOR equity markets crept higher amid increasing hopes that the US Federal Reserve will continue a path of interest-rate cuts including one this week.
The so-called Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) stocks geared into the artificial intelligence story outperformed traditionally more defensive sectors as investors remain fixated on the potential growth opportunities that could be delivered by the technology.
It is now three years since the launch of Chat GPT, arguably the most important development in this post-pandemic market cycle in terms of performance winners and losers. As we enter 2026, OpenAI chairman Sam Altman has signalled an internal “code red” to refocus all company resources on Chat GPT. This follows recent high-profile releases of competitor chatbots from Amazon (Trainium 3), Anthropic (Opus 4.5) and Google (Gemini3) which all boast greater efficiency and improved performance for a lower cost. The heat, as they say, is on.
On the macro front in America, the recent, and extended, US federal government shutdown has created a vacuum in official data releases. Crucial inflation, employment and business and consumer spending updates have all been impacted, making it challenging to get a handle on the “shape” of the American economy. Absent official data, alternative data sources from the private sector are a helpful guide.
Regarding the employment picture, the latest ADP Research private payroll data does not make for good reading. Per ADP, small businesses have shed 172,000 employees YTD (120,000 in November alone) while mid and large businesses continue to hire, adding a total of 716,000 employees in 2025. Small businesses are the lifeblood of the American economy, employing nearly half of the overall workforce according to the US Chamber of Commerce. For context, the US was adding 200,000 employees per month just one year ago.
This deteriorating trend adds to the growing weight of evidence of a bifurcated or “K-shaped” US economy, between the “haves” (asset owners) and “have-nots” (everyone else). Increasing noise around the growing “unaffordability” issue among Trump’s voting populace is likely to dominate the political narrative as mid-term elections next year make their way onto the horizon. The elections are critical for Donald Trump and his team to ensure continued Republican control of the House of Representatives, which has the power to launch impeachment proceedings.
The growing “unaffordability” issue is a major reason that markets now expect aggressive monetary and fiscal easing in 2026. To give some sense of the loss of purchasing power being experienced by most working-class Americans, the price of a tin of Campbell’s condensed tomato soup cost is now one dollar and 30 cents, having cost roughly ten cents per can for almost 80 years (1897 to 1973). And one dollar, now not enough to buy a McDonald’s coffee, would have bought you a month’s supply of Hershey’s chocolate bars back in 1913.
Meanwhile, in fixed income world, the UK ten-year gilt yield rose above 4.5%, as data showing accelerating wage growth added complexity to the Bank of England’s policy outlook. Yields were also lifted by broader global trends, with German bunds climbing after ECB official Isabel Schnabel signalled comfort with market bets that the central bank’s next move could be a rate increase, and Japanese bond yields hitting multi-year highs ahead of a likely Bank of Japan rate hike next week. Expectations for next week’s BoE rate decision are still pricing high odds (an 84% chance) of a cut.
Turning to commodities, gold remained rangebound this week, hovering around the $4,200 per ounce mark, having enjoyed a +60% return so far in 2025, the best year since 1979. So-called gold “bugs” (believers in gold as a perpetual investment) will point to the fact that gold accounts for just 2.8% of global financial assets, and a move towards 5%, or even 10%, would be extremely bullish for long-term prices.
Meanwhile, silver prices surged to touch new all-time highs at over $59 per ounce as a combination of global supply shortages and persistent demand from industries such as solar and electric vehicles keep a bid under prices. The gold-to-silver price ratio sits at approximately 72 to one. Prior precious metal bull markets have powered the ratio to 40 to one or lower. The implications for silver prices are clear should history rhyme.
Looking ahead to this week, Wednesday’s conclusion to the two-day US Federal Open Market Committee meeting will be the highlight. An interest-rate cut is baked in, with futures markets pricing 87% odds of a 25-basis point reduction according to CME Fed Watch.
More important will be the number of dissents from voting members regarding the ultimate decision on interest rates and the infamous dot plot where each governor gives their estimate for the future path of rates. Each will be surgically dissected for any clues on the likely path ahead for monetary policy.
