Why Markets Should Keep Running Hot

Global financial markets are entering a period of heightened "animal spirits" as fiscal, monetary, and regulatory policies in 2026 align to support increased risk-taking and corporate activity. While high valuations and geopolitical tensions raise concerns about potential instability, key market-based signposts currently suggest a resilient macro backdrop. Specifically, long-term CPI inflation expectations remain anchored at 2.4%, interest rate volatility is declining, and the U.S. dollar continues to trade near its fair value based on purchasing power. Furthermore, credit markets remain well-behaved with historically tight spreads, indicating that the stimulative policy shifts in major economies like the U.S., China, and Germany have not yet compromised market stability. As long as these indicators hold, a positive outlook for corporate earnings growth should continue to underpin market performance despite the recent 100% surge in gold prices and shifting foreign policies.