Fourth Quarter 2025: Everyone’s A Gold Bug Now!

Market Recap

The S&P 500 index of large US companies ended the year with a 17.9% gain.  Most of the gains were once again concentrated in a handful of mega-cap technology companies.  Thematic investing around companies associated with the artificial intelligence boom continued to dominate the US stock markets.  Small companies, represented by the Russell 2000 index, were up 12.8% for the year, recovering from steep declines in the first half related to tariffs.  The MSCI EAFE index of developed international stocks, rose an impressive 31.2% and the MSCI EAFE EM index of emerging market stocks rose 33.6%, far outstripping the US markets.  The US Aggregate Bond index rose 7.2% for the year, the largest gain since 2020.  The belle of the ball, however, was Gold.  The precious metal ended the year at a price of $4,325 per ounce, a gain of 64% for the year.  In this last week of January 2026, Gold has been trading well over $5,200 per ounce.  Silver gained over 146% for the year and is now trading over $110 per ounce.   

Investment Outlook and Portfolio Positioning

It was a wild and chaotic year, with strong recession signals and market disruptions from tariff uncertainties.  Geopolitical challenges were aplenty and stories of AI replacing jobs were pervasive.  However, through it all, the global economy continued to show surprising resilience.  GDP growth remained positive, spending stayed strong and corporate earnings were solid.  The US economy has experienced a “K” shaped recovery in which higher income consumers, emboldened by stock market gains, have kept the economy afloat with strong spending on travel, leisure and high-end electronics.  Meanwhile, lower income households are struggling with higher inflation and weak wages.  Delinquency rates have reached levels not seen since the Great Recession and savings balances are near historic lows.  It really is a tale of two economies.  On net, this has all been obfuscated by astounding spending on AI infrastructure, increasingly funded with corporate debt.  We are also starting to see the economic impact of huge, previously incubated, projects in microchips, EV batteries and solar panels moving from the planning phase to the building phase.  Much of this spending is supported by government debt.  We also expect to see relatively significant tax cuts, funded by more deficit spending, leading to larger tax refunds to boost spending in an election year.  In the short-term, we expect all this leveraged spending to boost the economy and for the benefits to broaden out to the physical economy, beyond technology services. 

The longer-term picture is murkier.  We believe that we are in the early stages of an AI driven bubble in US technology stocks.  Much like the Dot.com bubble, we expect it to burst eventually and for the impact to be significant enough to spillover into the rest of the economy.  That is our base case expectation.  In the past, much has been done to try to prevent bubbles from bursting, which we expect to be the case this time around as well.  Accounting shenanigans are already evident, such as illogical reporting of depreciation on AI investments that are becoming obsolete long before they are written off on corporate balance sheets.  This is down in the finance weeds too much for this letter, but such maneuvers have always been done at bubble tops to cover up the severity of overpricing of stocks and keep the music playing.

The level of risky borrowing (leverage) and wasteful duplicative spending exceeds even prior bubble fundamentals.  Additionally, we believe that too little attention is given to the fact that the technology is commoditized.  Competing models are unlikely to create monopolies that can generate sufficient revenue to justify the costs.  Rather than try to time the market correction, we are heavily skewed away from high valuation technology stocks. 

Gold Bugs

The single biggest story from 2025 has been the nearly 10% decline in the value of the US Dollar and the meteoric rise in the price of precious metals like Gold and Silver.  We started our position in Gold back in 2019, using the allocation as a hedge against expectations of a declining dollar in the face of uncontrollable US debt levels.  The rise in Gold prices for the last three years has now caught the attention of retail investors and spam ads about buying Gold are obnoxiously ubiquitous.  Despite the admittedly frothy appearance of the price chart, we still  hold a significant allocation to Gold, believing that investors continue to underestimate the severity of our US debt situation.  Currently, for every $5 we collect in taxes and tariffs, we are paying $1 on just the interest expense for our debt.  Most of our current debt was issued when interest rates were historically low.  However, $10 trillion of US government debt will mature in 2026 and we will need to reissue new debt at much higher interest rates to pay back the principal on those bonds.  This $10 trillion in bonds represents 33% of our national debt! 

Recently, we have been getting questions about why we don’t add even more to Gold.  However, it is important to know the history of the asset.  The price is very volatile.  It is even more volatile than the stock market!  It has had very long stretches of gross underperformance relative to stocks.  It produces no income, serves very limited industrial or commercial use, and it is impossible to precisely value.  It also happens to be the only asset class that has reliable served as a hedge against home currency declines.  We believe that Gold is a useful tactical asset class that fits well with the current prevailing conditions.  However, we do not view it as a permanent portfolio allocation, and we intend to unwind the position eventually when the risk of further US dollar decline abates.  As we have witnessed the parabolic rise in Silver prices in recent months, we have gotten questions on adding Silver to the portfolio.  We view Silver as an industrial metal rather than a reserve currency or store of wealth.  It is a useful industrial metal that has been gaining in price, partly because of expectations that enormous amounts will be needed to build out solar panels, which are an increasingly important source of energy.  However, some of the gains are likely due to retail investors viewing silver as a more affordable and relatable store of value, like Gold.  We disagree with this assessment and are not intending to add a position to Silver in portfolios at this time. 

As always, please feel free to reach out with any questions. 

Cordially,

Shane M. Alsworth, MBA, CFP®, CLU®, CIMA®

The views and opinions presented in this article are those of Shane Alsworth only 

Sources: Morningstar/Ibbotson data, BCA Research, iMGP Advisor Intelligence

*US large stocks (S&P 500 Index), US large cap growth (Russell 1000 Growth Index), US large cap value (Russell 1000 Value Index), US small stocks (Russell 2000 Index), (Developed international stocks (MSCI EAFE Index), Emerging Market stocks (MSCI EAFE EM Index), Core investment-grade bonds (Bloomberg U.S. Aggregate Bond Index), Floating Rate Loans (S&P/LSTA Performing Loan Index), US Dollar (DXY Index), Gold (Aberdeen Physical Gold ETF), Commodities (Bloomberg Commodity Index)

Disclosures:

Investments are subject to market risks including the potential loss of principal invested.

Asset Allocation does not assure or guarantee better performance and cannot eliminate the risk of investment losses.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability, or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Alsworth Capital Management Inc. ("Alsworth") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Alsworth and its representatives are properly licensed or exempt from licensure.

For additional information, please visit our website at https://www.alsworthcapital.com/