Historic highs for gold, silver, and copper; growing divergence between stocks and bonds; ‘structural differentiation’ in the U.S. stock market…….

Tony Pasquariello, a senior trader at Goldman Sachs, noted in his year-end review that the global commodities market performed exceptionally strongly in 2025. Gold prices rose 68% for the year, while silver prices surged 139%, both recording their best annual performance since 1979. Copper prices also hit new all-time highs.

At the same time, the U.S. stock market demonstrated clear structural divergence. Pasquariello emphasized that the current pricing of the equity market implies expectations of an acceleration in the economic cycle, though this has yet to be broadly validated by macroeconomic data. In stark contrast, the narrative reflected by the bond market remains more cautious, with the divergence between the two major markets reaching rare levels in recent years.

He pointed out that the six-month realized correlation within the U.S. stock market has continued to decline, indicating a high level of dispersion. This characteristic of low correlation and high dispersion is expected to persist into the next phase.

Scott Rubner from Citadel added that the market enters 2026 with a solid macro foundation. Record household wealth, expanding equity ownership, and ample cash balances collectively provide structural support to the market, enabling retail investor participation to remain at higher levels.

Precious metals enter a historic bull market

The year 2025 is undoubtedly a milestone for both precious and industrial metals markets. Gold prices soared 68% throughout the year, marking the best annual performance since 1979. Tony Pasquariello of Goldman Sachs analyzed that multiple narratives may underlie this rally: it could reflect pricing of a globally fiscally-driven landscape, growing concerns about the fiat currency system, or simply unprecedented strength in central bank demand.Silver’s performance was even more remarkable, surging 139% for the year and recording its largest increase since 1979. Looking back historically, silver had once risen fivefold in 1979, and this year’s trend undoubtedly approaches that iconic level again.

Meanwhile, copper prices decisively broke through historical highs, driving significant gains in related equities. The collective strength of gold, silver, and copper clearly indicates a structural increase in investors’ allocation demand for physical assets amid the current macro landscape.

Equity-bond divergence reveals underlying market contradictions

The U.S. equity and bond markets are sending markedly different economic signals. Pasquariello noted that the 5-year U.S. Treasury yield remains closely correlated with Bloomberg’s surprise index for labor market data, showing that the bond market is primarily anchored to labor market signals.

However, the stock market (represented by the S&P 500 Index) presents a different picture. It has significantly diverged from business surveys and cyclical indicators, preemptively pricing in an ‘economic cyclical acceleration’ that has yet to be validated in broad-based data. Pasquariello emphasized that his view is not to judge whether stocks or bonds are right or wrong, but to highlight risks: if the anticipated economic acceleration in the first half of 2026 fails to materialize, the current optimistic pricing in the stock market will face adjustment pressures.

Another notable divergence has emerged between the JOLTS job openings data and the S&P 500 Index. This correlation between the labor market and the stock market, which has persisted for many years, may officially break in 2025, marking an important structural change.

The structural characteristics of the U.S. stock market continue to strengthen.

Within the U.S. market, the divergence between growth and value stocks continues to deepen. The ratio of the Nasdaq 100 Index to the Russell 2000 Small Cap Index keeps climbing, extending the market’s characteristic of ‘the strong getting stronger.’ Pasquariello pointed out that while small-cap stocks may experience periodic rallies under potential liquidity support from the Federal Reserve, from a structural perspective, he does not believe small caps can consistently outperform large-cap stocks represented by tech giants.

In terms of market volatility, the six-month realized volatility of the S&P 500 Index remains at a low level, confirming the recent market’s high dispersion characteristics. The VVIX index, which measures the volatility of market panic sentiment, outlines a unique path of market sentiment evolution since 2025.

Moreover, Goldman Sachs’ hedge fund VIP basket has continued to deliver steady long-term performance. Except for a brief deviation during the meme stock frenzy in 2021, this basket has maintained a clear and stable pattern of excess returns relative to the S&P 500 Index, making 2025 a standout year for the hedge fund industry.

Pasquariello concluded his analysis by highlighting the long-term upward trend of the S&P 500 Index since its pandemic lows. Despite the market undergoing another test of intuition versus reality in 2025, U.S. stocks ultimately continued their long-term upward trajectory. The key question now is how the risk-reward ratio of the market will evolve as the index approaches the upper boundary of this long-term trend channel.