Cassandra’s Cry: A Weak Dollar, Sharp Commodity Divergence, and the Road to 2026

Summary:

As global markets head into 2026, the defining macro theme is no longer growth versus recession, but currency debasement versus real assets. A deliberately weakened U.S. dollar, structurally constrained commodity supply, demographic pressures, and political influence over monetary policy are reshaping asset allocation. Precious metals — led by silver — have surged far beyond equities, while volatility is set to remain a permanent feature rather than a temporary disruption.

The final week of the year passed quietly for global financial markets, with many participants away for the holidays. We, too, paused our regular bulletins, using the time instead for reflection, balance-sheet work, and system upgrades. As we publish our final note of the year, our aim is not to rehash 2025 in detail, but rather to outline — plainly and without embellishment — how we see 2026 shaping up.

A Weak Dollar Is No Accident

The dominant macro theme of the post-Donald Trump era has been persistent dollar weakness — and we see no reason for this trend to reverse in the coming year. Throughout the year, we have repeatedly argued that the dollar has been deliberately devalued, to the point where it increasingly struggles to function as a reliable unit of account.

The dollar index (DXY) is set to close the year down roughly 10%, while assets priced on the other side of the scale have seen substantial gains. U.S. equities have thrived in this environment: the S&P 500 reached fresh all-time highs and ended the year up around 18%. In a world where policy rates hover near 4%, equity investors once again found reasons to smile.

Zooming out, the MSCI World Index also closed the year at record levels, delivering returns north of 20%. This pattern has been broadly consistent across developed markets.

Demographics, Debt, and the Case for Lower Rates

One structural issue we repeatedly emphasized throughout the year is demographics. Falling marriage rates, rising divorce rates, collapsing birth rates outside Africa, and rising life expectancy all point to a future where fewer workers are expected to support a growing elderly population.

This demographic reality implies sharply rising healthcare expenditures for governments over the coming decade. In turn, public debt burdens will expand further — and servicing that debt will require interest rates to remain structurally low. Against this backdrop, we expect interest rates to continue declining into 2026, particularly in the U.S.

It is worth noting that in 2025 alone, G20 central banks cut rates 58 times, while raising them just seven times — with Japan and Brazil as notable outliers.

Precious Metals: Real Money in an Inflationary World

In an environment where inflation risks persist while interest rates are suppressed to sustain debt dynamics, capital naturally seeks protection. Gold and silver — history’s most enduring stores of value — have benefited enormously, followed by a broader rally across industrial and precious metals.

Silver has been the standout performer. Long described by us as carrying enormous latent potential, silver prices surged roughly 175% this year, topping global return tables. Put differently, silver outperformed the S&P 500 by nearly eight times. Platinum followed closely behind, while gold ended the year up approximately 72%.

With no credible alternative to the dollar emerging as a global anchor currency, we expect demand for precious metals to remain structurally strong in 2026.

Why Silver Still Matters

Beyond price action, silver’s fundamentals remain compelling. Industrial demand continues to rise, inventories are shrinking, and China’s planned export controls add further pressure to already tight supply. Crucially, silver remains the most accessible precious metal for retail and institutional investors alike.

After the gold–silver ratio broke decisively below the 77.5 level we closely monitor, silver rapidly outperformed, pushing the ratio toward 57. While silver’s recent parabolic rise suggests a sharp correction is likely — potentially near the $87 range — we see such pullbacks as pauses rather than trend reversals.

Rather than fixating on nominal price targets, we believe the gold–silver ratio could compress further toward the 31–32 range in silver’s favor over time.

Fed Politics Will Matter More Than Ever

One of the most consequential questions of 2026 will be who replaces Jerome Powell as Federal Reserve chair when his term expires. President Trump has repeatedly criticized Powell for not cutting rates aggressively enough, and his appointments to the Fed’s board are already shifting the balance of power.

While there appears to be growing consensus around Kevin Hassett as a potential successor, internal divisions within the Fed will be closely watched by markets. Hassett’s pro-rate-cut stance reinforces our conviction that the weak-dollar theme will persist — further strengthening the strategic case for precious metals.

This is why we describe the current moment as “Cassandra’s Cry”: an uncomfortable truth that many prefer not to hear, but which is becoming increasingly visible.

Technically, the DXY has been testing the critical 97 level — a major support zone stretching back 15 years. With rising U.S. borrowing costs and mounting political pressure on the Fed to ease, we believe a decisive break lower is increasingly likely.

Volatility Is the Price of Protection

Precious metals’ upward journey will not be smooth. Volatility will accompany gains, and investors should prioritize preserving purchasing power over chasing nominal wealth. Prudence, not speculation, remains the guiding principle.

Bitcoin: Not Forgotten, But Not Immune

Not everyone owns enough precious metals — nor enough Bitcoin. After testing our $125,000 target last year, Bitcoin surprised many by failing to keep pace with the weak-dollar theme, retreating toward $80,000 instead. Recent rebound attempts have been muted, increasing downside risk in the near term.

Technically, Bitcoin looks fragile, even if it continues to hover near the $89,000 area. Still, in the broader geopolitical context — especially escalating U.S. pressure on China and Russia — blockchain-based alternatives to the SWIFT system should not be dismissed. We intend to keep Bitcoin in our model portfolio, waiting patiently for more favorable entry points.

AI, Energy, and Defense: Structural Themes Endure

Artificial intelligence dominated market narratives in the second half of the year, and we expect it to remain central in 2026. While debate persists over whether AI investment is a bubble or a revolution, we see periodic corrections as healthy rather than terminal.

Rather than focusing on headline names that have already surged — Nvidia up 41%, Palantir up 150% — we favor companies that use AI to enhance productivity and margins. Given AI’s immense energy requirements, energy stocks should also remain in focus.

Defense spending, too, is structurally rising in the post-Trump world. Europe’s growing emphasis on self-defense argues for renewed attention to European equities. Among currencies, while we are not enthusiastic long-term euro bulls, we believe the euro will outperform the dollar in 2026, with EUR/USD targeting the 1.2250–1.2500 range after closing this year just below 1.18.

Türkiye: A More Constructive Outlook

In Türkiye, the disinflation process continues, and we see near certainty that the Central Bank will proceed with rate cuts in the new year. With oil prices down nearly 20% over the year, Türkiye — as a net energy importer — stands to benefit both on inflation and the current account.

Improving global risk appetite, alongside better U.S.–Türkiye relations and expectations that CAATSA sanctions could be lifted, should support capital inflows. Five-year CDS spreads have fallen toward 200 basis points, their lowest level since 2018.

Rising gold prices have also bolstered balance sheets across the economy, from household savers to the central bank. The CBRT’s net foreign currency position has recovered to around $60 billion, reinforcing support for the lira and lira-denominated assets.

We expect a cautious stance in the first half of 2026, followed by more flexibility in the second half. Our year-end forecasts stand at USD/TRY 53.00 and EUR/TRY 64.00. With 10-year bond yields dipping below 30% for the first time in nine months, we see scope for yields to approach 24% next year if disinflation stays on track. Turkish lira bonds remain attractive in our view.

Equities: Selectivity Required

While global markets enjoyed a celebratory year, Borsa Istanbul lagged, ending down more than 5% in dollar terms. Weak profitability remains the core issue. Still, banks — which fell about 8% in dollar terms — could benefit meaningfully from rate cuts. A decisive weekly close above the 17,000 level would shift the outlook materially.

Real estate stocks, too, should benefit from easing financial conditions, and the housing sector remains firmly on our watchlist.

Throughout the year, our goal has been to offer a clear, big-picture perspective without drowning in noise — encouraging financial literacy while remaining grounded. If we have erred, we ask forgiveness.

Barring major developments, we look forward to reconnecting in the second half of January. Until then, we wish you and your loved ones health, calm, and balance in the year ahead — enough money, plenty of peace, and lasting happiness.

Author: Emre Değirmencioğlu

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