How to think about markets at all-time highs
It’s striking: across equities, credit markets, and even safe-haven alternatives, almost every asset class is hovering at or flirting with record highs, even as geopolitical uncertainty continues to simmer. In the U.S., the S&P 500 recently pushed past 6,700, and its total-return version is up by about 14–15 % year to date. This follows two back-to-back 20%+ years in 2023 and 2024. The Nasdaq and the “Magnificent Seven” remain the engines of this advance, powered by AI optimism and strong earnings outlooks.
Credit is sending a similar signal. Investment-grade and high-yield spreads are still compressed near multi-decade lows. The compression of credit spreads underscores broad confidence in corporate fundamentals.
Gold and silver continue to trade higher almost daily. Gold is now up a stunning 48% year to date and seems to be intent at topping $4000/oz. Central banks continue to accumulate it aggressively (net purchases above 1,000 tons in 2024), signaling a global shift away from pure dollar reserves. Silver is up 66% year-to-date and is nearing its prior all-time high, set over a decade ago.
When it comes to crypto, the strength is also palpable. Bitcoin is currently trading in a range around $124,000. More broadly, Ethereum and other leading tokens have also posted substantial gains, with inflows from institutional investors, crypto ETFs, and DATs (digital asset treasury companies).
Remarkably, this synchronized rally has held up despite geopolitical headwinds, including trade tensions, regional conflicts, and political uncertainty. Investors appear to be assuming that central banks will remain accommodative, inflation will stay anchored, and growth will be moderate but steady. Within that framework, the “liquidity + earnings + policy support” blend continues to prevail.
While it is important to understand where things stand, it is more important to understand WHY things are trading where they are. To that end, it is important to discuss valuation.
The fundamental value of the equity market stems from the multiple that investors are willing to pay for the earnings generated by its constituent companies. The S&P 500 is up mid-teens this year, following two 20%+ years in 2023 and 2024. Earnings grew 11% in 2023 and 9% in 2024. Given that the value of the S&P 500 increased twice as much as earnings growth, this means that the valuation multiple expanded over the past two years. As we sit here today, equity valuations are rich by almost any historical measure. The S&P 500 trades at low 20s times forward earnings, well above long-term averages. Investors are paying a premium for stability and AI-led growth stories (Capex spending), leaving little margin for error if earnings or policy shift.
Meanwhile, there is no “fundamental” valuation for gold, given it doesn’t have many industrial uses (besides jewelry). Gold’s price is determined by supply and demand, and the aforementioned demand by central banks over the last few years has taken an increasing amount of supply off the market. Silver, which has significantly more industrial uses than gold, is considered a cousin of gold in terms of its store of value use case. Crypto has emerged as a new technological alternative to gold and silver. We believe all of these assets are surging in value because there appears to be a growing sentiment that the world is slowly shifting away from the US dollar as the global reserve currency. This is due to the fact that the US dollar, as well as all major currencies, are fiat currencies, meaning their value is not tied to anything. Whether this will ever become a reality is too hard to predict; however, the sentiment does seem to be building. From a valuation perspective, gold and silver are near nominal highs but not expensive in real terms; both remain reasonably higher than prior peaks when adjusted for inflation. Crypto’s total market cap is still a small fraction of global equity or bond markets. In other words, while equity multiples look stretched, real and digital hard assets do not.
The one asset class we have not yet discussed is fixed income, also known as bonds. Generally speaking, in the US, when referring to bonds, most people mean US treasuries. US treasuries are valued based on their yield, which is the fixed coupon on the debt divided by the price. As bond prices rise (due to demand), yields decline, and vice versa. Yields are a function of a number of factors. For simplicity’s sake, they include the overnight lending rate (set by the Federal Reserve) and the term premium, which is how much extra yield investors demand to lend money to the US government for longer periods of time. Short-term US treasuries generally yield close to where the Federal Reserve interest rate is currently, while longer-term yields will be either higher or lower depending on expectations for inflation, expectations for rate policy, and supply and demand. The benchmark most commonly used is the 10-year Treasury bond. Since the Federal Reserve began hiking interest rates in 2022, the yield on the 10-year has ranged between roughly 3.5% and 5%. What is more important, however, is that yields have trended lower since the early 1980s when Paul Volcker hiked interest rates into the mid-teens. Since 1981, the 10-year yield has gone from almost 16% to a low of just 0.50% during the COVID crisis. As mentioned earlier, as yields decline, the value of bonds increases. This trend appears to have ended when the Federal Reserve began raising interest rates in 2022 to combat high inflation.
For decades, the traditional 60/40 portfolio (60% equities and 40% bonds) served as the default framework for long-term investors. It worked because the relationship between stocks and bonds was reliably negative: when growth slowed and equities sold off, yields typically fell, the value of bonds rose, cushioning returns. That dynamic has changed. Since 2022, correlations between stocks and Treasuries have turned positive, indicating that both can decline in value when inflation or policy risks rise simultaneously. Combine that with structurally higher deficits, deglobalization, and a new geopolitical risk premium, and the classic 60/40 mix looks less resilient than it once did.
That’s why assets like gold, silver, and crypto are becoming more important diversifiers. Gold remains the most proven store of value over centuries, a real asset with no counterparty risk and long-term purchasing power stability. Silver, though more volatile, has similar defensive properties but with cyclical upside tied to industrial and renewable demand. Both metals tend to outperform when real yields fall or when investors question the durability of fiat purchasing power, conditions that increasingly define the current environment.
Crypto, led by Bitcoin and Ethereum, represents a newer, digital form of scarcity. Bitcoin’s fixed supply and rising institutional adoption (via spot ETFs and corporate balance sheets) make it a hedge against monetary debasement. At the same time, Ethereum captures the growth of decentralized computing and tokenized assets. In portfolio terms, these are asymmetric assets: small weights can have a meaningful impact, and they often thrive when traditional financial assets look most extended.
From a portfolio construction standpoint, even modest allocations to gold, silver, and crypto combined can improve risk-adjusted returns. The goal isn’t to chase performance, but to own assets driven by different forces, where value is anchored in scarcity, not just liquidity.
So in summary, equities are expensive; however, high-quality companies are still growing earnings, and the AI capex cycle is in full thrust. They are vulnerable to exogenous shocks, so it's essential to have a balanced and diversified exposure (the S&P 500 is not diversified, by the way). Gold and silver, while breaking or nearing all-time highs, remain highly sought-after assets and could serve as valuable portfolio diversifiers. Given the run they have had, it would not be surprising to experience a pullback at some point in the not-too-distant future. Crypto is still an emerging asset class, but it harnesses some of the global macro trends discussed above. Crypto is highly volatile and speculative, but similar to gold and silver, it could serve as an interesting diversifier to an overall investment portfolio. Lastly, as it relates to bonds, short-term yields above 4% seem attractive, but factoring in an almost 3% inflation rate makes them less so. Longer-term bonds at similar 4% yields do not seem attractive; however, they can experience significant demand in the event of an exogenous shock.
