- Traditional safe havens including U.S. Treasurys, the Japanese yen, and gold have failed to provide typical protection during 2026 market volatility, with gold falling from its January peaks and the yen hitting 40-year lows.
- Rising inflation expectations, fueled by a surge in oil prices from $60 to $120 following the closure of the Strait of Hormuz, have made bonds less attractive by eroding purchasing power.
- The Japanese yen has weakened to between 162.50 and 163 per dollar, its lowest level since 1986, driven by a widening interest rate differential as U.S. Treasury yields rise.
- Despite geopolitical conflicts, global risk appetite remains high as investors prioritize corporate earnings growth and pile into AI-linked equities.
Quotes
“The driver of equities is EPS growth, that’s the only driver that matters on the long run for equities, and EPS forecasts are going up”
“The longer the yen stays weak, the worse the outlook for long-term inflation, and the greater the pressure on long-dated Japanese bonds.”
“We are pretty much in new territory”