By Kevin Ford, FX & Macro Strategist at Convera
As 2026 kicks off, the economic landscape feels more like uncertain territory than a familiar phase. The U.S. dollar was once a default “safe haven” for global investors, but now it’s showing weakness. In the first half of 2025, the dollar fell more than 10% against major global peers, which resulted in its weakest first-half performance since 1973. That decrease led investors to reconsider their traditional assumptions about risk, capital flows, and the dollar’s strong status.
Despite all the talk about “de-dollarization,” foreign enthusiasm for U.S. assets remained surprisingly robust. Capital didn’t vanish but shifted. In many ways, that duality defines the challenge of Q1 2026: assets in dollars remain attractive, but the automatic confidence that used to accompany them is no longer guaranteed. A prime example is the 2026 GENIUS Act, which created a new, price-intensive bid for short-dated Treasuries by formalizing 1:1 liquid-asset backing for U.S. payment stablecoins. This translated into larger, steadier demand for Treasury bills.
U.S. Equities Breadth Returns
The S&P 500 posted an 18% gain in 2025, showing that U.S. equities are following a similar path of recalibration. While that is a solid headline number, the deeper picture is more striking. Moreover, the MSCI World ex-U.S. index surged by 31%, showing a historic redistribution of global capital.
Additionally, the “S&P 493,” or stocks outside of the tech-heavy Magnificent 7, drove multiple gains for the first time in years. It contributed 10.4% to returns in comparison to 7.5% from the top seven tech firms. This broader participation indicates that 2025’s rally goes beyond being “just a tech story” to a genuine, diversified upturn across sectors.
Risks on the Horizon
The market in 2026 is all about balancing opportunity with risk. AI and tech valuations remain a focal point for bubble fears. Beyond the headlines, less obvious risks lurk. We’re seeing potential encroachments on Federal Reserve independence and stress within private credit markets. Both scenarios could significantly influence volatility in ways that catch even seasoned investors off guard. For example, stress showed up in 2025 as Net Asset Value financing accelerated and broadened, with funds scrambling for liquidity in a thin market exit. Both could influence volatility in ways that catch even seasoned investors off guard.
Metals and Tangible Assets Make a Comeback
Physical assets proved a remarkable comeback in 2025. For instance, copper saw a 40% rise in 2025, which was its sharpest jump since 2009. This increase is driven by flowing global infrastructure demand and the broader energy transition. Additionally, gold and silver closed the year at levels we haven’t seen since 1979. This historic momentum, however, shifted into a regime of extreme volatility in early 2026, as we saw with the “January 30 Flash Crash” where silver plummeted nearly 30% in a single session after briefly scaling all-time highs above $120 per ounce.
This performance suggests that after a decade of financial engineering and digital speculation, investors are returning their attention to tangible value. In other words, it’s a hedge against currency debasement and economic uncertainty.
Fiscal Strain and Market Balance
Fiscal pressures are appearing across all market dynamics. As U.S. debt continues to climb, its trajectory is unsustainable unless national growth consistently outpaces interest obligations. For now, markets bet that aggressive stimulus, sufficient liquidity, and Fed easing will sustain growth through the year. As of now, attention is on whether or not this bet proves self-fulfilling or if it bridges to fiscal strain. That remains the defining question of the year.
Three Key Themes in Q1 2026
In 2026, investor attention is expected to center on three primary forces. For starters, monetary policy is entering a more unpredictable phase. Central banks are juggling increasing debt, political pressures, and the constant sway of growth and inflation. Any mistake could quickly ripple across global markets.
Next, the dollar’s role is no longer as sturdy as it has been in years past. Once considered the safe haven, the greenback is under sharp scrutiny. This will continue to force investors to reconsider currency exposure and diversify investments where possible.
Finally, geopolitics and economics are becoming more interconnected. Everything from trade disputes, debt negotiations, and cross-border tensions are coming together, meaning that market outcomes are increasingly shaped by events beyond corporate earnings or economic data. Together, these dynamics create a landscape that’s both volatile and full of opportunity, making it essential to anticipate change rather than simply react to it.
Navigating the Year from an Uncertain Beginning
The first quarter of 2026 will more than likely amplify these uncertain dynamics. While short-term volatility is inevitable, long-term planning isn’t a “nice-to-have” but it’s essential. Organizations and investors who can anticipate macro trends and adjust their strategies accordingly will likely come out ahead. No one will be a “winner” in this market if they only react to sudden shocks. Agility, informed economic analysis, and strategic risk management are critical.
The first quarter and likely beyond will be a test of assumptions. While things like the dollar’s performance and looming economic and geopolitical tensions create areas of opportunity, risk will remain looming in the background, and those who remain proactive in planning will navigate these waters most successfully. With Kevin Warsh’s nomination refocusing the Fed-independence debate, investors should watch for a chair more open to rate cuts and a leaner balance sheet, which is currently around $6.5–$6.7 trillion. However, in the end, the bond market’s message is simple: if policy gets too easy, inflation and long yields will enforce discipline. And no administration wants to learn macro the hard way.
