Blog post by Empower Wealth

Resilience through selectivity: VanEck’s Jan 2026 Summary

Please Note: This report was created and provided by VanEck.

“Gold is a way of going long on fear.” – Warren Buffett

There is no doubt that many investors are mindful. Many markets appear fully priced, and geopolitics weigh heavily. As a result, during the last quarter of 2025, gold and its miners have continued to rally.

There were queues in Sydney’s Martin Place this past quarter, as euphoric retail investors waited to buy the world’s oldest currency to store their wealth. While frothy markets have been a concern, other factors that have increased investors’ fear include excessive government spending, massive government debts and seemingly unchecked money creation. When you consider this and combine it with asset price levels at significant premiums and geopolitical risks, investors have a lot to grapple with in the near term.

While gold had a strong quarter, a newer currency, bitcoin, did not. As recent performance of the ‘digital gold’ suggests, it is more akin to a risk-on asset – as investor sentiment soured, so too has the price investors are willing to pay for it, for now.

Buffett’s mentor, Benjamin Graham, said, “Price is a creature of the market’s mood. In booms, it is set by the greediest buyer; in busts by the most fearful seller.”

Assessing the market’s mood and therefore prices has become difficult. Some prices are being set by greed, others are being set by fear. For the patient, pockets of value remain, but if 2025 (and 2024) have taught investors anything, it is that trying to pick the top, or the bottom, is foolish.

Last quarter, US equities, dominated by technology mega-caps, lagged global equities.

But US small caps had a strong quarter. Emerging markets and Europe have also done well. It’s unlikely that greed is setting the prices in those markets; prudence, fundamentals and diversification from exposure to the US dollar were likely the driving forces there. From a sector perspective, healthcare was the best-performing global equity sector last quarter. This quarter, the best performing Australian equity sector has been materials. The local market’s resources sector has been buoyed by demand, particularly for commodities essential for the global clean energy transition. As the local economy heats up, all eyes
are on the RBA, which unlike the US Federal Reserve, may have to tighten into 2026.

Recently, the Future Fund, released a positioning paper: Portfolio Resilience: Part One.

Resilience, we think, has been a theme of 2025, and it will continue into 2026. In 2025, you did not need to fight the Artificial Intelligence (AI) trade; you just needed to widen it. For Australians building international equity exposure, shifting a slice from concentrated US growth towards World ex-US value is no longer contrarian, it’s resilience. Emerging markets, gold, quality and real assets are tools for resilience. The Future Fund believes, “an investor’s unique circumstances should determine what definition of portfolio resilience is appropriate for them.”

Resilience is a system that can absorb shocks, adapt across regimes and stay the course. That takes conviction and diversification across styles, factors, fixed income and alternatives that respond differently to macro forces.

“It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success.”
– Seth Klarman

Growth and policy cycles in the US

To succeed in global markets, an investor needs to be across a few concepts:

the economic cycle and related policy outlook;
corporate earnings outlooks; and
appropriate discount and exchange rates

It’s complicated, and the margin for error can be slim. For instance, when an economy faces inflation persistently above target, with growth around trend, investors would normally expect the central bank to be lifting interest rates.

On the other hand, what if the labour market is showing signs of softening? Would the central bank hold fire on tightening or commence easing?

It turns out the answer might depend on where you are.

In the US, inflation has been well above the 2% target and shows little sign of returning below that yardstick. While higher inflation attributed to tariff increases may be viewed as a one-off, the lags are long, stockpiling before tariff increases suggests impacts have not yet peaked, and inflation could continue to build well into 2026.

The US labour market has softened. But this has been partly attributed to the extended government shutdown. It is hard to know exactly how much employment has softened.

At the same time, a wave of deportations means that the labour supply is shrinking. It is therefore doubly difficult to know what this means for the economy. Job growth seems to be running at levels sufficient to match labour force growth, yet the unemployment rate is creeping higher. In GDP terms, the seesaw may continue, with a strong third quarter to be followed by a soft fourth quarter, which was impacted by the government shutdown.

The US consumer is still plugging away, and AI investment is boosting private capital expenditure.

Meanwhile, the US Federal Reserve (the Fed) has now cut interest rates three times in a row. President Trump and his supporters have not been silent about their desire for more cuts and markets agree that more cuts are on the way. Lower rates are good for equity markets.

Growth and policy cycles in Australia

Across the Pacific, things are the same. But different.

Australia has experienced an inflation bounce away from target, driven by administered prices as well as energy prices.

There is conjecture about how much of the move is real and how much is driven by seasonality, coupled with a new data survey, neither the cost side (wages) nor the demand side (discretionary consumer spending) of the inflation equation currently looks threatening. Indeed, as in the US, the labour market is looking tenuous, with full-time jobs and hours worked in Australia both soft. In both countries, the unemployment rate has risen roughly half a percentage point over the past year.

So, is the Reserve Bank of Australia (RBA) also contemplating further rate cuts, like the Fed?

After three cuts spread through 2025, the RBA is, at best, on hold. It is dropping hints about tightening next year. And markets are priced that way.

Perhaps the difference between the US and Australia is fiscal policy. But fiscal policy is, at best, neutral year-on-year in Australia heading into 2026, while in the US, via the One Big Beautiful Bill, it will experience additional fiscal stimulus next year. Though we note expiring health subsidies and on-again-off-again tariffs make even ballpark measurement difficult.

It’s hard to escape the conclusion that the difference is down to economic philosophy and politics. President Trump seems intent on influencing the Fed, favouring lower rates. In Australia, the Government is allowing the RBA to achieve its long-term interpretation of its dual mandate, ignore growth while focusing on inflation.

While the RBA will likely get its way, its biggest hurdle seems to be a globally induced stumble. This would lead to substandard growth in Australia, in GDP terms. For investors, it could lead to substandard earnings growth. The Australian equity market is looking close to fully valued.

Making sense of growth and policy cycles

In the US, the disparity of views on the direction of the economy and rates is not only across the broad investment and economic communities, but also within policy institutions themselves. The Fed’s latest dot plot” projections show a range of Fed views from three more rate cuts, all the way to a hike.

In the end, it seems more likely that reality will take charge. Attempts to keep cutting rates seem more likely to lead to an inflation rebound and bond market revulsion. This, in turn, could be a drag on equity valuation metrics.

Abandoning the bullish rates/growth view would also be a drag on US equity earnings outlook, already dependent on the tech sector.

In other parts of the world, rate cycles are also turning. Japan has already commenced a cautious tightening cycle, albeit from emergency levels, and European Central Bank members have started jawboning rates higher, too.

In 2025 markets experienced a notable disparity in the sources of global investment returns. Gains in China, Europe and Japan were all paced by valuation gains, that is, price-to-earnings (P/E) multiple expansion, not earnings growth. Whereas in the US, returns were primarily earnings driven.

Central banks leaning into growth, as mentioned above, implies late-cycle positioning and a steeper hill for earnings.

But, in the US, the past year’s earnings growth was focused on the tech champions and, more particularly, the AI trade. This leads to the US$64 trillion question: If continued gains are dependent on AI, it’s worth assessing investors’ confidence in AI’s corporate earnings.

The other late-cycle risk is around credit, with little room for tangles. Credit spreads remain vanishingly thin with defaults elevated, albeit off low levels and with corporate leverage at solid levels and set to rise as the AI capex spend is increasingly funded by debt, not retained earnings.