SeaCrest Investment Management, LLC
GLOBAL MARKETS
Another Remarkable Quarter
The global stock markets had another good quarter in 2025. The S&P 500 Index rose 2.7% while the Dow Jones Industrial Average moved higher by 4.0%. The Nasdaq composite was higher by 2.7%, while the MSCI All Country World Index climbed 3.2%. The Bloomberg U.S. Aggregate Bond Index advanced 1.1%. U.S. Treasury longer term rates were slightly higher while the yield curve exhibits a partial inversion in maturities under three years. The ten-year Treasury yield, at 4.17%, was two basis points higher at quarter-end versus the prior quarter while the two-year Treasury yield at 3.5%, fell 13 basis points. The three-month U.S. T-bill, at a yield of 3.63%, is now 54 basis points lower than the 10-year U.S. Treasury note. The yield curve is looking more ‘normal’. Thoughts of a recession; there are none to be had.
Precious metals were ‘on a tear’ this quarter. New all-time highs were recorded in both gold and silver, the later almost doubling its all-time high as delivery issues plagued the commodity exchanges; not enough silver on hand to deliver against speculative contracts apparently. Other commodities are also exhibiting relative strength. All of this maybe masking underlying inflation issues as input costs for many manufactures rise, or not? But the question remains, will gold hit ~$5000 per ounce in 2026 while silver hits ~$85 per ounce? To be continued…..
GDP activity was again very healthy for the quarter estimated at three percent. Companies continue to remain torn between absorbing tariffs or ‘sharing’ them with end purchasers. The more they ‘share’, the greater the impact on inflation, which in turn may slow the pace of rate reduction(s) by the FOMC. We continue to be concerned about the economic environment in 2026, particularly the second half of the year.
During the quarter, the Federal Reserve reduced overnight interest rates again. Another or possibly two more rate reductions are anticipated for the balance of 2026. The current level of inflation is still higher than the Federal Open Market Committee’s (FOMC’s) desired target of two percent. Significant tariffs, if maintained (that is still a big ‘if’ as negotiations continue) against some or many of our trading partners could be inflationary or at least that is a stated concern of the FOMC. There is that possibility the Supreme Court will rule against the 2025 tariffs, which will create considerable turmoil until resolved. More on that if the economy slows and demand subsides, resulting in a deflationary scenario. Of continuing concern, or an added reason for the FOMC to continue on the path of lower interest rates, there is approximately $10 trillion dollars of US government debt (a third of the entirety) maturing over the course of 2026. Rolling over this debt at current interest rates means that our nation will be spending more servicing that debt than funding the Department of War.
Continued market volatility is still on our calendar for 2026. While there was one real bout of that earlier in 2025, the upward momentum fueled by AI, continues.
As noted previously, we continue to be concerned about a global equity market correction of even more substance and more longevity than occurred in April 2025. Unfortunately, we are in a rather lonely group. U.S equity technology/A.I related valuations exceed even the most obnoxiously absurd valuations and in some cases exceed those from the beginning of the 21st Century. Maybe we started to worry too early in the cycle? In 2025 and now continuing into 2026, the theme is: anything activity remotely linked to A.I will be generating untold wealth for any player remotely referencing/involved with or even using A.I. And for those companies who pay for AI related expenses in crypto, their ‘rewards’ are/will be incomprehensible. Paying forward for a decade plus of anticipated growth is baffling to us. Historically speaking, we have seen how this ‘show’ ends.
Even as longer-term fixed income rates have gyrated this quarter, the interest rate spread between investment and non-investment grade securities continues to trade at historically narrow levels, not reflecting the realities of 2026 and beyond. Our continuing search for and investment in undervalued assets requires patience and a healthy dose of optimism for humanity.
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