AI-driven bubble fears and a liquidity scare took centre stage during the fourth quarter. Mixed sentiment triggered spikes in market volatility, yet most major equity indices closed the year at or near all-time highs. Precious metals, particularly gold and silver, delivered another standout quarter, while cryptocurrencies tumbled. We examine the drivers behind the turbulence and outline the outlook for the year ahead.

Over the past five years, fiscal policy has played a dominant role in shaping global economic dynamics. Following the COVID-19 pandemic, global debt levels surged to unprecedented highs, driven by necessary fiscal interventions. Concurrently, rising interest rates have significantly increased debt-servicing costs, adding further strain to public finances.

US equity markets kept breaking records in the third quarter, yet with a record 91% of fund managers believing US stocks are overvalued (BofA Fund Manager Survey), this may be one of the most hated rallies on record. As Peter Lynch once warned, far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves.