In a note published on Tuesday, Jurrien Timmer, director of the global macro at Fidelity Investments, explains how a changing economic landscape could influence the markets, the central bank policy and the trajectory of bitcoin and gold. The S&P 500 reaching new heights and the “Trump Trade” reversal course, Timmer offers nuanced information on fiscal policy, inflation and the role of risk assets in a “Limbo” market environment.
The Trump effect
Drink observations that the first six weeks of 2025 brought unexpected market movements and an unusually high “noise / signal ratio”. The dominant expectation of the market arriving in the year – anticipates “higher yields, a stronger dollar and the outperformance of American actions” – has suddenly overturned. He notes: “It seems that 2025 that the consensual trade in higher yields, a stronger dollar and to surpass American actions have turned into opposite.”
Timmer stresses that Bitcoin, costs of a rally at the end of the year, remains at the top of the three -month return ranking, followed closely by gold, Chinese actions, basic products and European markets. At the lower end of the table, the US dollar and the treasury bills evoke the rear.
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Despite the record levels of the S&P 500, Timmer calls this a “digestion period” after post-electoral optimism. He explains that the market under the title index is much less decisive. According to Timmer, the equal index is pending, with only 55% of the shares negotiating above their 50-day mobile averages.
“The feeling is optimistic, the credit differences are close, the equity risk bonus (ERP) is in the 10th decile, and the VIX is 15 years old. The market seems to be a prize for success.” Timmer stresses that if profits growth was 11% robust in 2024, the revisions seem dull, and there are open questions on what could happen if long-term rates climb around 5% or beyond.
One of the most critical pieces of Timmer’s analysis focuses on the federal reserve policy. He points the recent IPC reportWith a central inflation figure over the year of 3.5%, as an almost consensus indicator that the Fed will remain on break. “It is now almost unanimous that the Fed is pending for a while. This is exactly true, in my opinion. If the neutral is 4%, I think that the Fed should be a little above this level, given the potential probability that “3 is the new 2.” »»
He warns against the possibility of a “premature pivot”, recalling the policy errors of the period of 1966-1968, when the rate reductions occurred too early, allowing inflation to gain a foothold.
With the Fed apparently away, Timmer thinks that the next market engine for interest rates will come from the long end of the curve. More specifically, he sees the tension between two scenarios: one with endless expenses and an increase in term premiums – assessments of shares and another focusing on budgetary discipline, which probably was going to bond yields since a long time.
Timmer also notes that weekly unemployment complaints could highlight themselves for bond markets, given the way public spending under the new administration could influence employment data.
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Timmer highlights a potential optimistic motif – a background of the head and shoulders – in the Bloomberg goods spot index. Although he continues to call him a definitive change, he notes that raw materials remain in a wider secular secular trend and could see a renewal of investors’ interests if inflation pressures remain high or if the conditions taxes remain loose.
Gold, he notes, has been “a big winner” in recent years, surpassing the expectations of many skeptics: “Since 2020, Gold has produced almost the same return as the S&P 500 while having lower volatility. In my opinion, gold remains an essential element of an diversified portfolio in a scheme in which obligations could remain altered. »»
Timmer sees gold testing the critical level of $ 3,000 in the middle of a global increase in money supply and a decrease in real yields. Historically, gold has shown a strong negative correlation with real yields, although Timmer thinks that the strength of metal can also reflect tax dynamics rather than monetary – in particular the geopolitical demand for central banks in China and Russia.
Bitcoin vs. or
According to Timmer, the outperformance of gold and Bitcoin “triggered a lot of conversations on monetary inflation”. However, he distinguishes between “quantity of money” (the money supply) and the “price of money” (price inflation).
“The purpose of this exercise is to show that the growth in traditional assets over time cannot be explained by monetary discharge (which is a favorite hobby for certain bitcoiners),” he writes.
Timmer’s graphics suggest that, although nominal M2 and nominal GDP have moved near Lockstep for over a century, consumer prices inflation (IPC) has somewhat delayed the growth of the Monetary mass. It warns that the adjustment of asset prices only against M2 can produce misleading conclusions.
However, his analysis notes that bitcoin and gold have Strong correlations with M2Although in different ways: “It is interesting that there is a linear correlation between M2 and gold, but a power curve between M2 and Bitcoin. Different players from the same team.
Timmer has highlighted Gold’s long -term performance since 1970, noting that it has actually followed the pace – or even exceeded – the value created by numerous bond portfolios. He considers the role of Gold as a “coverage against obligations”, especially if the sovereign debt markets remain under pressure by budgetary deficits and higher levels in the long term.
Timmer’s note underlines that strong Bitcoin performance cannot be seen in isolation of gold or the wider macroeconomic environment. With yields in political flows and decision -makers struggling with deficits, investors can be forced to reassess the Traditional portfolio 60/40 model.
He stresses that if the past expansions of the money supply have often stimulated inflation, the relationship is not always one by one. The meteoric increase in Bitcoin could, according to Timmer, reflect a market perception that budgetary concerns – not only monetary policy – do not lead the prices of assets. “And as you can see on the dotted orange line and the green line, Bitcoin added the same value amount that night money has taken more than 300 years to create,” he concluded.
At the time of the press, BTC exchanged $ 95,700.
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