Transcription
We need it for security purposes. We need it for national security and even world security. It's very important.
David, we're seeing economic retaliation now from the European Parliament in response to US aggression. The Europeans are furious. They're resentful and the impact of all of this will be felt for years to come.
The shifts happening right now in the global monetary system, the geopolitical order, and global trade have profound implications for the market. But the vast majority of people are completely misreading what is truly happening in financial markets today.
Take a look at this chart. It shows us the US stock market against what's called the US economic policy uncertainty index. Now, while in early 2025, the US stock market and US economic uncertainty moved in tandem to one another. We've seen a divergence build between these two lines over the course of the last year. So despite US economic uncertainty remaining at one of the highest levels over the last 30 years of data, the US stock market has somehow been able to thrive and make new all-time highs.
Now on the surface, it looks like investors have simply stopped caring about this level of uncertainty that they are completely disregarding the threats to global trade and the geopolitical order. But this couldn't be further from the truth.
You see, if we look at the US Treasury bond market, it has been falling over the course of the last year, declining by 12% over this period, which is the equivalent to wiping out $360 billion worth of market value off the US Treasury bond market. And the same thing can be said about the US dollar index that has also been declining, meaning the US dollar has lost purchasing power relative to other global currencies.
Just over the course of the last month, we've seen a record hundred billion dollar of outflows from US money market funds. According to Else Sega data, geopolitical risk, sovereign debt risk, and now the offloading of US assets by foreign holders. All of these things are happening right now. The truth is we are seeing a massive flow of capital out of US assets as a result of all of this uncertainty.
Now, you might be thinking, if that's really the case, why are we not seeing the US stock market decline? Well, when a currency is losing value, weird things can start happening in the market. So instead of measuring the US stock market in US dollar terms, we can look at how its price is evolving compared to something that is holding its value like gold. Gold's primary use case has been a storehold of value for thousands of years, weathering through the storms of many currency collapses throughout history. So by anchoring the S&P 500 index to gold instead of the dollar, we're removing any potential impact of a currency devaluation. And this is what it looks like.
Indeed, since December of 2021, the S&P 500 index has fallen by 45% measured in gold and is now hitting the lowest levels since 2014. This decline really began to accelerate right here in late 2024, which is the very moment where US economic policy uncertainty began to rise. If we compare that to the S&P 500 measured in dollar terms, we see that this has led to a spectacular divergence between the two. The current levels of uncertainty is not leading to a nominal collapse of the S&P 500, but instead a collapse in the real return of the index.
So, what does this all mean for the actual S&P 500 index right here? Well, it means that investors are flocking away from the stock market, but they're flocking away from the currency at the exact same pace. And this is the element that most people are missing right now. They only see the reason for why investors should be moving away from the US stock market and concluding that this should necessarily be putting downwards pressure on an index like the S&P 500. But the problem is that the S&P 500 is measured in US dollars. And the dollar is also seeing a record outflow as well. This means that in currency terms, the S&P 500 is stable or even rising slightly, but in gold terms, it's contracting substantially.
Gold has been the best performing asset in 2025. We've been fortunate enough to ride it the entire way through. If you're wondering how we are approaching gold as an investment in 2026, you can watch our 2026 investment strategy report for free in the description below.
Now, what does this mean for the S&P 500 index looking forward? For now, we've seen the outflows from the US dollar outweigh the outflows from US equities, which is why the S&P 500 index is making new all-time highs. But the big question is whether all of these concerns are eventually going to lead to a panic in the stock market like what happened in early 2025 that could lead to a large contraction in the S&P 500 index even when measured in terms of dollars.
At the end of the day, the answer to that question depends on the S&P 500's earnings. And this is what they look like. Earnings have been melting up over the course of the last year despite the many predictions that they would contract following the implementation of tariffs. Quite the opposite has started to take place. Earnings have actually accelerated higher.
Now remember, earnings are priced in US dollar terms. This means that earnings are not adjusted for inflation and certainly not adjusted in terms of gold. So if the dollar loses purchasing power, companies don't need to sell more units, gain more market share, or improve their productivity in order to see their earnings rise. This is exactly what is taking place right now. In some ways, this is a loophole in the financial system that the Trump administration is benefiting from, whether that is intentional or not. But this is exactly why we have the stock market at all-time highs and also why strong earnings could continue to push the market higher.
Now, there is a very important nuance. The stock market is not a perfect representation of earnings. We can see that the index swings up and down around earnings depending primarily on investor sentiment and allocation. Despite very strong earnings throughout 2024 and 2025, the stock market witnessed multiple corrections exceeding 5%. In the short term, a four to 5% correction from the all-time high would not surprise us. But just like in April, we do not believe that this will derail the underlying direction of earnings that currently have significant tailwinds pushing them higher.
The real consequences from all of this, however, is that outflows from the US are not just going into gold. They're going into foreign markets around the world. It is creating shifts in how capital is being allocated across global financial markets. We currently have exposure to Argentinian stocks, Greek stocks, and the UAE at Bravos Research as a way for us to take advantage of these massive flows in capital out of the US. Again, we highlight the details of our strategy that you can access in the report that you can watch for free in the description. Thank you for watching.