Geopolitical dynamics and the Trump policy agenda have once again unsettled global markets at the start of 2026. As the precious metals bull market charges ahead, discussions are intensifying over whether the era of "American exceptionalism" is increasingly waning. Concurrently, escalating conflicts between U.S. President Trump and the Federal Reserve have reignited concerns about risks to the Fed's independence.
In a recent exclusive interview, Nathan W. Thooft, Chief Investment Officer of Equities and Multi-Asset and Senior Portfolio Manager at Manulife Investment Management, stated that against this backdrop of layered uncertainties, non-US assets are becoming increasingly popular. He believes the resulting precious metals frenzy and optimism towards non-US markets are set to continue.
The trend towards non-US investments is significant, with a more optimistic outlook on Chinese stocks. Whether investing in equities or bonds, Thooft remarked that global markets will continue to exhibit a trend of broadening participation this year. "Last year, many non-US economies' stock markets performed significantly better than the US, and this trend is very likely to continue this year, with certain regions globally continuing to outperform the US," he said. This is partly because US market valuations are already elevated, and partly because allocations to US stocks are already very high—in many portfolios, US stocks are already overweight, making it difficult to increase holdings further."
Most importantly, in Thooft's view, this is because the US dollar is expected to be in a downtrend over the coming years. "For most of the past decade, dollar strength was a common phenomenon, and last year marked the first significant decline in the dollar in a long time," he noted. He anticipates that "dollar weakness will persist, which will benefit assets outside the US, particularly emerging market assets, as debt issuance, economic financing channels, and investment sources in emerging market economies are largely dollar-denominated. Therefore, we are becoming increasingly positive about increasing exposure to non-US stocks in both developed and emerging markets."
In fact, he stated that they have observed US investors with substantial assets beginning to increase their exposure to these asset classes as they see better performance outside the US. "Last year, for the first time in many years, we saw more attractive investment returns from markets outside the US for dollar-based investors. So, as US market participants recognize this trend, it will attract more capital flows to other non-US markets, creating a self-reinforcing cycle. US investors might allocate record amounts of capital to non-US markets. Meanwhile, from an asset allocation perspective, because non-US assets have underperformed for much of the past decade, many US investors have quite limited exposure to them, which also provides more room for subsequent gains," he explained.
However, Thooft added, "This does not mean we wish to be completely underweight or avoid US stocks altogether; rather, when allocating new capital or seeking new investment opportunities, we are increasingly looking beyond US markets."
Specifically, he noted that just as they see strong performance from US AI spending and AI enablers, AI-related infrastructure development in China and across Asia will also be considerable. "We believe that in global developing regions and across Asia, certain technology and industrial sectors will perform exceptionally well, driven by massive capital expenditure dynamics fueled by AI and technological productivity gains. This is one of the key themes and areas we think will continue to develop favorably," he said.
"For example, the South Korean stock market performed exceptionally well last year because it has many companies related to the AI investment theme. More importantly, we expect listed companies in these markets to show improved growth rates this year compared to the past 12 months, and market participation will broaden further. Therefore, some more cyclical sectors within emerging markets, such as financials and certain industrial sectors, might perform well," he stated.
Furthermore, Thooft is optimistic about Chinese stocks. "We are generally more optimistic about the potential in China over the coming year, especially regarding Chinese equities," he said. He analyzed that, on one hand, they are currently seeing momentum and a shift in market sentiment towards Chinese stocks. "Over the next 12 months, these sentiment and technical factors are expected to remain favorable. On the other hand, the Chinese government will place greater emphasis on providing a degree of stimulus, with effects particularly visible in the manufacturing and infrastructure sectors. Of course, we also hope to see the Chinese government focus more on boosting consumer demand," he added.
Regardless, he stated, "Our overall view on Chinese stocks is turning more positive. Whether through active management, or against the backdrop of fiscal and monetary easing, a weaker US dollar, and actual impacts like tariffs being lower than previously feared, the entire Chinese market is poised for decent performance, with opportunities to create value."
Regarding the Indian stock market, which has outperformed for many years, Thooft believes the current situation or dynamic is that many investors compare India with China, leading to capital flows often being weighed between the two. "Last year, as the Chinese market began to improve and sentiment turned more favorable, investors started selling Indian assets, which had performed well for over five years, and switched back to buying Chinese market assets. We think this trend is likely to continue. China will be the recipient of international flows, while India will be on the selling side. From a valuation perspective, the Indian market is also quite expensive now," he commented. "While we don't necessarily think the Indian market will completely underperform, we currently prefer other regions within emerging markets."
Risks to Fed independence have returned. Early this year, President Trump escalated his conflict with the Federal Reserve, bringing back previously feared risks to the Fed's independence.
Thooft acknowledged that this risk is indeed a tricky issue, partly because the market so far does not seem overly concerned about the erosion of Fed independence. "For instance, we haven't seen significant volatility in US Treasury yields, suggesting the market believes the investigation into Powell might not uncover much substantive evidence," he added. "It is well known that Powell will step down as Fed Chair mid-year. The bigger question is, after his chairmanship ends, will he remain on the Fed Board? While it's impossible to predict completely, I think the likelihood of him staying is increasing, mainly to provide some support for the principle of Fed independence."
So, is there a risk of the Fed cutting rates aggressively in the "post-Powell era"? Thooft admitted that a scenario exists where the Fed could cut rates far more than currently expected. For example, if the Fed decided to lower rates all the way to 1%, the market might initially react quite positively but would quickly see the negative implications. "In such an extreme scenario, first, the market would likely perceive that the Fed may not be as independent as claimed; second, if rates were cut to such low levels, the financial conditions might become excessively loose, raising concerns that inflation could surge significantly 12 months later," he explained. "Therefore, the Fed currently faces a balancing act regarding the extent of rate cuts, needing to keep inflation within its desired range while avoiding the risk of overheating the economy. If the Fed acts too aggressively in the cutting cycle, the market might敏锐地 detect this提前."
However, Thooft also pointed out that this is not the first time the Fed's independence has been questioned; Trump's actions last year sparked similar discussions, and analogous situations have occurred in past US political environments. Although the rhetoric sounds louder now (due to the Trump administration being more outspoken), the Fed's independence has faced historical challenges.
Thooft believes that, overall, the Fed is still expected to maintain its independence. But this doesn't mean the Fed's thinking won't align more closely with the Trump administration: some newly appointed Fed governors might be more "dovish," with some members potentially emphasizing growth and employment over inflation, giving them理由 to argue for further rate cuts. "We also expect some Fed members to argue that the neutral rate is lower than the historical neutral rate currently assumed by the Fed. There is considerable debate within the Fed about the exact level of the neutral rate, and some new members will advocate for a lower neutral rate than currently assumed," he analyzed.
"There is no single绝对 correct answer for the neutral rate; nobody knows its exact value. Therefore, the potential composition of the Fed in the 'post-Powell era' would give it the capacity or justification to continue cutting rates. Our base case is for the Fed to cut rates three more times during 2026, each by 25 basis points. One cut would occur before Powell steps down as Chair, and two after," he stated.
Precious metals are in a cyclical bull market. Against this backdrop of persistent geopolitical risks, US policy uncertainty, lingering risks to Fed independence, and growing popularity of non-US assets, safe-haven precious metals like gold and silver have hit new highs repeatedly this year after a strong performance last year. "Crazy copper" and "wild tin" have followed suit, sparking discussions about a cyclical bull market in precious metals.
Thooft believes precious metal prices still have room to rise. Although prices might show some froth in the short term, the underlying structural factors driving the collective rise in gold, silver, and other precious metals like platinum and palladium will not disappear. Some factors stem from increased government spending, some from concerns about fiat currencies, and others from geopolitical uncertainty.
"As the year progresses, gold prices could reach new highs and may continue to rise in the coming years. Silver is relatively more uncertain due to its more active trading and speculative nature. But Manulife also expects silver prices could continue to rise." More importantly, he said, "We focus more on gold, have allocated to it in some tactical products, and will continue to hold, expecting gold prices to potentially achieve new gains in 2026."
Thooft is also positive on other precious metals with stronger industrial attributes. He revealed that Manulife's portfolios included some copper assets last year and will continue to hold them this year. The supply-demand dynamics for copper are very favorable: demand is increasing, partly due to substantial demand from AI capital expenditure, utility sector needs, and expectations that global growth rates may rebound further from current levels.
"For many industrial metals, there are also several intrinsic growth drivers this year, providing a very positive environment on the demand side. Meanwhile, supply is constrained as the pace of new supply coming online is difficult to accelerate quickly. Therefore, we are currently in a period of increasing demand but largely stable supply, which provides a favorable environment for price increases in most industrial metal sectors over the next 12 months," he stated.
However, Thooft also cautioned that industrial metals will experience greater volatility due to trade dynamics and tariff impacts. For example, part of copper's strong performance last year stemmed from tariff dynamics, which altered copper's cost structure. Given that tariff negotiations will continue not only this year but also in the coming years, this factor will also influence the volatility of some commodities, particularly industrial metals.
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