CoreMacro

Almost all bull markets are built on a foundation of truth. With enough time, however, FOMO takes over, causing prices to overshoot fundamentals. This is what has happened to gold and silver, and increasingly to other metals as well.

Contrary to widespread narratives, there is little cash on the sidelines. The aggregate amount of investable funds-to-equity market cap ratio is at an all-time low in the US and very low in other developed markets.

The conventional wisdom attributes the fall in the yen and the rise in long-term JGB yields to growing fiscal concerns. This narrative, however, fails to explain why the Japanese stock market has risen by 29% in dollar terms since the start of 2025, outperforming the All Country World Index by 6%.

Over the past few months, we have been deploying new market-timing tools aimed at improving the accuracy of our calls. Today’s report highlights our ultra high-frequency Daily Oscillators, which provide daily signals on the near-term direction of the S&P 500 and long-term Treasuries.

Much like the 2000 episode, we expect this year to unfold in two stages: A “Great Rotation” from tech stocks to non-tech names in the first half of 2026 followed by a broad-based selloff in stocks in the second half on the back of a weakening US economy.

At major technical crossroads, markets eitherpull back before staging a sustainable breakout, or attempt to break out only to drop considerably (i.e., a fakeout). We believe the latter dynamics are more likely to play out.

Special Report

Every year, the Global Asset Allocation team compiles a list of our favorite books, essays, and articles from our strategists ahead of the holiday season. This year, we focus on writings by practitioners in the world of finance, business, and beyond. While diverse in their backgrounds, one theme stands out: Adaptation.

Lots of data out today, most of which point to a global economy that is cooling but not (yet) freezing.

This year, we once again present our 2026 outlook as a retrospective from the future – a future in which the AI boom turned to bust. Next week, please join me for a Webcast on Wednesday, December 17 at 10:30 AM EST (3:30 PM GMT, 4:30 PM CET) to discuss the economy and financial markets. We will also host a Webcast for APAC on Tuesday, December 16 at 8:00 PM EST (9:00 AM HKT+1 day). And with that, I will sign off for the year. I wish you and your loved ones a very happy and healthy 2026. We will be back on Friday, January 2 with our MacroQuant Model Update.

Japanese financial assets will finally have unfettered access to outsized returns. This performance will come in fits and starts, but we are comfortable laying our cards down on buying the yen, and Japanese industrial stocks.