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The global economy, much like a calm sea before a storm, appears deceptively stable. Markets have rallied, volatility has receded, and investors are once again daring to believe in trees that grow to the sky. Yet beneath the surface, the currents of politics, policy, and valuation risk continue to swirl, quietly reshaping the landscape in ways that will define 2026.
At Peregrine Wealth, we have learned that apparent calm often conceals brewing change. This is one of those moments.
Unsettled powers, uneasy markets
In the United States (US), policy uncertainty remains a defining feature. The Trump administration’s rhetoric on trade, immigration, and fiscal expansion continues to oscillate between stimulus and strain. Markets have grown almost numb to the noise – yet history reminds us that complacency is rarely rewarded.
Meanwhile, China’s slowdown is revealing deep structural challenges. The property sector remains fragile, capital is seeking safer havens, and the final trade negotiations with the US still need to be inked. Across the Atlantic, France, which, along with Germany, has in recent decades formed an axis of stability in Europe, has become a flashpoint once more. Protests and fiscal pressure have reignited debate about the sustainability of Europe’s social model, just as the continent faces anaemic growth and mounting political fragmentation.
In this fractured world, geopolitical uncertainty is no longer an occasional shock, it is the baseline condition of the global economy.
The turning of the monetary tide
After two years of monetary tightening, the global conversation has shifted toward rate cuts. The market is so convinced that US President Trump’s influence on the US Federal Reserve (Fed) will win out, that several more rate cuts are now priced in. US inflation is not as bad as original tariff fears suggested, but the victory is incomplete. The US, still buoyed by a resilient consumer and large fiscal deficits, is reducing rates with caution. The market is as data dependent as it’s ever been. Europe and parts of Asia, by contrast, have already begun easing as growth falters.
This divergence will define capital flows and currency trends in the quarters ahead, with investors recalibrating their expectations from “higher for longer” to “lower, but slower.” All signs point to an oversold dollar that could retrace at short notice, but it won’t last long. Global central bank reserve accumulation has excluded the dollar and this removes a several-decade long tailwind for the US currency.
Valuations and the gold signal
Equities, particularly in the US, have priced in a world of perpetual growth and policy rescue. Earnings have held up, but valuations leave little margin for error. When optimism becomes consensus, risk is often mispriced.
In contrast, gold, that ancient barometer of fear and faith, continues to make new record highs. It tells a quieter truth: that investors, while participating in the rally, are hedging against its fragility. The illusion of stability is consensus at the moment.
Seeing beyond the illusion
At Peregrine Wealth, our approach remains grounded in discipline and diversification. We continue to prepare for multiple scenarios rather than anchoring to a single forecast. In an age of uncertainty, that is not caution, it is wisdom.
Enjoy this edition of Peregrination.