jakiro
On December 16, 2025, the U.S. financial market presented a complex pattern.The S&P 500 index is hovering near 6,800 points, slightly lower than its high point at the beginning of the year, but overall it remains within the historically high range.The price of gold exceeded US$4,300 per ounce, setting a new record, with an annual increase of more than 60%.The price of silver is close to $64 per ounce, with an annual increase of more than 100%.Crude oil (WTI) prices fell to around $57/barrel, reflecting concerns about oversupply and demand.The Federal Reserve recently restarted the purchase of short-term Treasury bonds to ease pressure on the money market. Although it did not officially call it quantitative easing (QE), it essentially increased liquidity injection.This has left the market divided on the direction of asset prices: Will all asset classes collectively rise again?
The current macro environment can be described as “mild stagflation”: the inflation rate (CPI) remains at around 3%, higher than the Fed’s 2% target; the unemployment rate has risen to the 4.4%-4.5% range, and the labor market is showing signs of weakness.Although the Federal Reserve has continuously cut interest rates, it is cautious about further easing and is expected to cut interest rates only once or twice in 2026.This limits the Fed’s policy space and is unable to support asset prices as vigorously as in the past.
AI-driven stock market fragility
Artificial intelligence (AI) remains a major driver of the stock market, but its sustainability is being questioned.In the past two years, AI-related spending has driven technology stocks to rise sharply, and companies such as Nvidia have experienced rapid revenue growth.However, recent signs point to rising bubble risks.Although companies such as Oracle have signed huge AI contracts, their revenue growth has not met expectations and capital expenditures have increased significantly (expected to be US$50 billion in fiscal year 2025), resulting in negative free cash flow.The market is worried about overheating of AI construction: the supply of infrastructure such as data centers and GPUs is expanding rapidly, but actual demand (such as the transformation from generative AI to general artificial intelligence (AGI)) has not yet caught up.
Historical experience shows that similar technology bubbles (such as the Internet bubble in 2000) often explode before oversupply.Capital cycle theory states that the influx of large amounts of money into a certain area will lead to a decline in returns.Currently, leading companies such as OpenAI incentivize supply chain overbuilding to reduce computing costs, but this may lead to price collapse.Well-known investors such as Michael Burry and Steve Eisman have publicly expressed concerns that the AI narrative will collapse if large-scale computing cannot achieve AGI.Recently, Oracle’s stock price has fallen sharply, dragging down AI stocks such as Nvidia, reflecting investors’ deepening doubts about return rates.
Bitcoin, as a risk appetite indicator, is converging with technology stocks.The current price of Bitcoin is about US$90,000, which is weaker than gold, suggesting that market risk aversion is rising.The U.S. dollar index (DXY) fell back to around 98, and the 10-year U.S. Treasury yield is about 4.2%, indicating that loose expectations partially offset inflationary pressures.But a slowdown in foreign capital inflows, such as a reversal of the yen carry trade, could further weigh on risk assets.
Commodity Markets: The Beginning of a New Bull Market?
Contrary to the stock market divergence, commodity markets performed well.Gold, a leading indicator, has led the commodity rally.Industrial metals such as silver and copper followed suit, and natural gas and copper prices broke new highs.Although crude oil is in the doldrums, its valuation relative to gold is at a historical low, and sentiment is extremely pessimistic.Historical data shows that commodity prices tend to rebound after two consecutive years of decline. Currently, crude oil may enter a third-year downward cycle, and the probability of subsequent rebound increases.
In a stagflation environment, real assets (such as commodities, energy) generally outperform financial assets.The energy sector deserves special attention: Warren Buffett continues to increase his holdings of Occidental Petroleum. The stock has an attractive valuation and a higher dividend yield than precious metal mining stocks.Oil and gas companies benefit from potential supply constraints and geopolitical risks and are expected to perform strongly on the back of economic stimulus.
Investment Outlook and Risks
Looking forward to the first half of 2026, inflation is expected to rise slightly, the unemployment rate continues to rise, the S&P 500 may decline, the U.S. dollar index weakens further, the 10-year yield rises, gold and silver remain flat or fall slightly, and crude oil rises sharply.The Fed’s easing cannot completely offset the risk of bubble bursting, similar to the Internet bubble in 2000 or the financial crisis in 2008, when interest rate cuts failed to prevent the stock market from crashing.
Investors should shift to a defensive allocation: increase exposure to commodities and energy and reduce high-valuation technology stocks.Although AI has great long-term potential, the short-term risk of overheating is significant.The commodity bull market is in its early stages, and real assets are more resilient amid stagflation.
Overall, the current market is not a “Goldilocks” environment, but rather a transition period filled with uncertainty.As asset price differentiation intensifies, we need to be alert to the risks of AI narrative collapse and foreign capital outflows.Meanwhile, commodity gains provide hedging opportunities.Only by rationally assessing capital cycles and macro constraints can we respond to potential fluctuations.
