The speaker argues that rising US policy uncertainty is not causing a simple selloff in US equities because capital is leaving the US dollar and other dollar assets at the same time. In nominal terms the S&P 500 can still make highs, but in gold terms it has been in a major real decline, while strong earnings have helped keep the index elevated.
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The core thesis is that the market is misreading what is happening: the apparent resilience of US stocks is masking a broader capital flight out of US assets and, especially, out of the US dollar. The speaker says geopolitical tension, trade disruption, sovereign debt risk, and policy uncertainty are all pushing money away from US assets, but because the dollar itself is weakening, the S&P 500 can still rise in nominal terms even as its real value erodes. To support that view, the speaker points to several charts and flows. First, they compare the US stock market with the US economic policy uncertainty index and say the two were moving together in early 2025, but have diverged over the last year: uncertainty remains near a 30-year high while US stocks are at all-time highs. …
Near term, the main risk is a sentiment-driven 4% to 5% pullback even if the bigger rotation story remains intact. Watch US dollar trend and whether the recent outflows from US assets broaden or pause.
Over the next few weeks to months, the base case is that nominal US equities can hold up if earnings keep rising, while real performance versus gold stays weak. That view weakens if earnings roll over or the dollar stabilizes meaningfully.
The structural claim is that a weaker dollar can make US financial assets look stronger in nominal terms than they are in real terms. If that regime persists, global capital allocation may keep shifting toward gold and non-US equities.
The US stock market is making new all-time highs despite record economic policy uncertainty because capital is fleeing the US dollar at the same pace as it is fleeing US equities, masking a real decline.
The speaker shows divergence between stock prices (rising in dollar terms) and a gold-anchored measure (falling 45% since Dec 2021), arguing that dollar devaluation offsets equity outflows.
The S&P 500 measured in gold terms has fallen 45% since December 2021 and is now at its lowest level since 2014.
Speaker presents a chart showing the S&P 500/gold ratio declining sharply, particularly accelerating in late 2024 as policy uncertainty rose.
S&P 500 earnings have been accelerating higher despite widespread predictions they would contract after tariffs were implemented.
Speaker states that contrary to predictions of contraction following tariffs, earnings have melted up, partly because they are not inflation-adjusted.
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