Global capital is beginning to rotate from the United States towards precious metals such as gold and silver, non-US equity markets and India, as weakening dollar dominance and rising fiscal stress in developed economies reshape investor allocation, according to Pankaj Tibrewal, Founder and CIO of IKIGAI.

In IKIGAI's latest quarterly newsletter, Tibrewal characterizes 2025 as an unusually unpredictable year for global capital markets . He notes that the structure of global trade and capital flows is fundamentally changing, with the era of smooth globalisation fading as trade becomes more regional and political considerations play larger roles in economic decision-making.

US Dollar Dominance Weakening

One significant consequence of this shift has been the gradual erosion of US dollar dominance in global markets. Tibrewal highlights that the United States' share of global trade has declined substantially from around one-third in 2000 to roughly one-quarter today. Simultaneously, the dollar's share of global foreign-exchange reserves has fallen from 72% to 58% over the same period.

Fiscal pressures in the US have intensified significantly, with government debt approaching $40.00 trillion and annual interest costs nearing $1.00 trillion. The newsletter emphasizes that economic growth in the US is increasingly dependent on borrowing and continued capital inflows from international sources.

Non-US Markets Outperform

Despite US fiscal challenges, American equity markets remained resilient through much of 2025. The S&P 500 recorded 38 all-time highs during the year, pushing total US public equity market capitalisation to approximately $72.00 trillion. However, non-US equity markets and commodities significantly outperformed American equities in 2025.

Tibrewal suggests this imbalance between market representation and economic output presents a key consideration for long-term investors, questioning whether future capital allocation could increasingly favour international and emerging markets.

Precious Metals Surge

Gold and silver delivered exceptional performance during 2025, with gold rising approximately 67% and silver gaining nearly 147% in dollar terms, marking silver's strongest annual performance since 2007. Tibrewal attributes this surge to concerns around currency stability, government debt levels, and broader financial risk rather than random market movements.

Central banks played a crucial role in this trend, purchasing an average of approximately 66.00 tonnes of gold per month over the past year. This represents nearly four times the pace seen prior to 2022, reflecting efforts to diversify reserves and reduce dependence on any single currency.

India's Strategic Position

Tibrewal notes that India's macroeconomic position stands out favorably in the current global rebalancing. India began FY26 with strong momentum, recording GDP growth of 8.20% in the second quarter, supported by services, manufacturing, and public investment.

A healthy monsoon, rising rural wages, and GST cuts amounting to nearly ₹2.00 trillion supported domestic demand. The Reserve Bank of India reduced policy rates by 125 basis points and injected ₹11.00 lakh crore of liquidity into the financial system. India's external position remains relatively stable, with the current account deficit expected to stay below 1% of GDP, remittances reaching $136.00 billion, and gross foreign direct investment projected to approach $100.00 billion.

Commodities and Geopolitical Factors

Tibrewal observes early signs of a broader recovery in the commodities cycle following years of underperformance. This shift connects not only to economic demand but also to geopolitical considerations, particularly China's dominance in refining critical materials such as lithium, copper, and aluminum. These materials serve as key inputs for electric vehicles, data centres, and power infrastructure, increasing the strategic importance of commodities in global supply chains.

While risks remain, including fiscal constraints, global tariff uncertainty, and weak formal job creation, Tibrewal argues that the broader shift in global capital allocation could work in India's favour as investors increasingly prioritise balance-sheet strength and macroeconomic stability in their investment decisions.

The US stock market has closed with a third consecutive year of double-digit gains, positioning investors to evaluate whether a historically rare fourth stellar year is achievable in 2026. The sustained bull run, which commenced in October 2022, has been driven by artificial intelligence optimism, interest rate cuts, and economic resilience that has consistently defied recession predictions.

2025 Market Performance and Historical Context

Despite early volatility following larger-than-expected tariff announcements, US markets delivered robust performance across major indices:

Analysts note that achieving another year of strong returns in 2026 would require "everything firing on all cylinders," including robust corporate earnings, supportive Federal Reserve policy, and continued AI-driven investment momentum.

Corporate Earnings Growth Expectations

Earnings growth represents a central factor in sustaining market momentum into 2026. S&P 500 profits are projected to climb over 15.00% in 2026, building on a 13.00% increase recorded in 2025. Unlike previous years when gains were heavily concentrated in tech giants including Nvidia, Apple, and Amazon—collectively known as the "Magnificent Seven"—analysts anticipate broader-based growth across a wider array of companies.

Artificial Intelligence Investment Dynamics

Artificial intelligence continues serving as a key market driver, with massive capital expenditure in AI infrastructure and anticipated application demand exciting investors. However, returns on this substantial spending face increasing scrutiny from market participants. Any potential pullback in AI investment could significantly impact valuations and limit future gains across technology sectors.

Federal Reserve Policy and Interest Rate Environment

Monetary policy will play a pivotal role in market direction throughout 2026. Markets are closely monitoring Federal Reserve stance, with investors seeking dovish signals that maintain low borrowing costs. Fed funds futures indicate expectations for at least two additional quarter-point rate cuts in 2026, following 175 basis points of reductions implemented over the past two years.

The economy must demonstrate sufficient resilience to avoid recession while supporting continued market growth. This delicate balance between accommodative policy and economic stability remains crucial for sustained market performance.

Historical Patterns and Political Factors

Historical analysis provides mixed outlook for fourth-year bull market performance:

Midterm election years typically bring political uncertainty, historically resulting in weaker market performance compared to other years within presidential terms.

Geopolitical and Market Risk Factors

Geopolitical dynamics could significantly influence market performance throughout 2026. The US-China relationship remains a key variable, with potential diplomatic breakthroughs representing upside not yet reflected in current market pricing. Conversely, renewed tensions or unexpected policy developments could inject substantial volatility into global markets.

Additional risk factors include execution challenges in AI spending programs, potential monetary policy surprises, and broader economic headwinds that could temper growth expectations across various sectors.

While optimism surrounding corporate earnings growth, AI investment momentum, and accommodative monetary policy could support another strong year for US equities, the combination of political uncertainty, market headwinds, and AI execution risks makes the path to sustained double-digit gains in 2026 less certain than previous years.