Data Update 3 for 2026: The Trust Deficit - From Bonds to Gold to Bitcoin!
•January 27, 2026
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Why It Matters
The analysis shows that eroding trust in institutions can reshape asset‑class performance, prompting investors to rethink reliance on sovereign ratings and central‑bank signals for risk assessment.
Key Takeaways
- •2025 trust crises spanned tariffs, rating downgrade, shutdown, Fed challenges.
- •US Treasury yields barely moved despite downgrade and political turmoil.
- •Yield curve steepened, indicating stronger growth expectations amid flat long‑term rates.
- •Dollar weakened against major currencies while gold surged over 60% in 2025.
- •Trust erosion had limited impact on corporate bond spreads, except lower‑grade debt.
Summary
The video examines the 2025 "trust deficit" that rippled through major asset classes, anchored by four headline‑making events: unprecedented U.S. tariffs, Moody’s downgrade of the sovereign rating, the longest government shutdown in history, and persistent challenges to Federal Reserve independence. By tracing how each story eroded confidence in institutions, the presenter links political turmoil to market behavior across treasuries, currencies, precious metals, and Bitcoin.
Despite the dramatic headlines, U.S. Treasury yields remained surprisingly muted. Short‑term rates fell, while 20‑ and 30‑year yields stayed flat, producing a steeper overall yield curve. Sovereign CDS spreads barely budged, signaling that market participants had already priced in default risk. Inflation expectations, derived from the 10‑year Treasury‑TIPS spread, hovered around 2.3% throughout the year, contradicting early‑year forecasts of a sharp rebound. Corporate bond spreads likewise showed little movement, except for a modest widening in sub‑investment‑grade issues.
The dollar’s performance underscored the trust narrative: a 7‑8% decline against major developed‑market currencies contrasted with a 65% rally in gold and a record‑high surge in silver, while Bitcoin also posted gains. The presenter highlighted that the Fed’s perceived loss of independence did not immediately translate into higher rates, arguing that long‑term yields are driven more by real growth and inflation expectations than by policy announcements.
These dynamics suggest that traditional gauges of trust—ratings, political stability, and central‑bank autonomy—may no longer dictate asset‑class behavior as tightly as before. Investors should weigh diversification into hard assets and scrutinize policy credibility, while policymakers must safeguard institutional independence to maintain market confidence.
Original Description
In this session, I start by looking at four news stories in 2025 that shook our trust in US institutions - the tariffs announced at the end of the first quarter, the ratings downgrade for the US two weeks later, the lengthy government shutdown in October/November and the yearlong questions about who would run the Fed. That loss of trust though played out different in different markets. The US bond market, treasuries and corporates, did not skip a step and seemed to take the loss of trust in stride. The currency markets were more shaken, with the dollar losing strength almost across the board. The gold and silver markets were spooked, with price surging, as fear drove at least a subset of investors to move out of financial assets. It is telling that Bitcoin struggled, behaving like equities for a portion of the year, a collectible for some and not quite doing well on either front.
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