Gold just hit $5,070 an ounce. Let that sink in.

A year ago it was under $3,000. That's a 74% move in twelve months, for the asset people call a hedge or "dead money." Meanwhile, the Dow crossed 50,000 for the first time in human history and nobody seems to be freaking out about it. The S&P 500 closed Friday at 6,836 after an ugly selloff that wiped out a week of gains in a single session. VIX spiked to 20.6. And the dollar is down again, with the DXY at 96.88. That’s its weakest level in over a year.

Here's the quick dashboard:

10-year Treasury at 4.06%.

WTI crude at $65.

Bitcoin near $97,000.

Copper at record highs above $11,700 per ton.

The story these numbers tell is fascinating and slightly contradictory. Gold screaming higher alongside equities, the dollar weakening while the U.S. economy still grows above trend, and oil sitting at $62 despite OPEC+ keeping production frozen. Something has to give, and I think I know what's about to shift.

The dominant theme right now is rotation. Not the gentle kind. The violent, regime-change kind where leadership flips and the consensus playbook gets shredded.

Small caps are up 8% year-to-date while the Magnificent Seven are down. Google, biotech, and energy are leading. Nvidia, Tesla, and Meta are lagging. That hasn't happened since early 2022, and it didn't end quietly then either.

The American economy keeps doing this thing where it refuses to confirm anybody's recession thesis.

January nonfarm payrolls came in at 130,000. Thats not spectacular, but vastly better than the 55,000 consensus. Unemployment ticked down to 4.3% from 4.4%. And January CPI landed at 2.4% year-over-year, below the 2.5% forecast, with core CPI at 2.5%, the lowest since May 2025.

But the 2025 jobs benchmark revision slashed 898,000 positions off the books. That means what we thought was a resilient labor market averaging 166,000 monthly gains was actually running at just 15,000. Fifteen thousand. That's barely treading water.

Healthcare carried January with 82,000 of the 130,000 total, while the federal government shed 34,000 jobs and that number is accelerating as DOGE-related cuts filter through the system.

The Fed is in limbo. Rates sit at 3.5%–3.75% after the cuts last year, and Kevin Warsh, Trump's nominee to replace Powell in May, has markets second-guessing the rate path. Warsh's reputation is hawkish, though Druckenmiller pushed back on that characterization in a recent interview, noting Warsh is more nuanced than people think. Both he and Ray Dalio endorsed the pick publicly. Markets currently price two cuts in 2026, probably June and September.

But if Warsh takes over with a mandate to keep inflation at bay, those cuts could easily get pushed to the back half of the year, or disappear entirely.

Equity valuation remains stretched. The S&P 500 at 21.5x forward earnings with a market-breadth divergence this wide is late-cycle behavior. Q4 2025 blended earnings growth hit 13%, with 74% of companies beating estimates, but the market yawned. That tells you expectations were already baked in.

I'm not bearish but I am cautious. Overweight quality value (financials, healthcare, energy), underweight long-duration growth trading above 35x forward. Cash at 12%, the highest I've held in over a year.

Brazil is the story I keep coming back to. The Selic rate at 15% is the highest since 2006. And at the moment it’s crushing domestic demand. GDP growth stalled at 0.1% quarter-over-quarter in Q3, and the central bank just signaled it may finally begin cutting at the March meeting.

Market consensus sees the Selic dropping to 12.25% by year-end. With inflation at 4.0% and the real trading at 5.38/dollar, this could be a compelling emerging-market easing play for the second half of 2026. But timing matters here and right now the fiscal deficit is widening and net public debt is headed toward 70% of GDP.

Argentina under Milei continues its shock-therapy experiment. Inflation has plummeted from triple digits, and the peso has stabilized, but the social cost is enormous and the political sustainability remains questionable.

Mexico is caught between nearshoring optimism and tariff uncertainty. Manufacturing activity has been strong, but the peso's sensitivity to U.S. trade rhetoric keeps foreign investors on edge.

Something genuinely remarkable is happening in Europe and I don’t think that the market hasn't fully priced it. Germany lifted its constitutional debt brake and committed €500 billion over twelve years for infrastructure and defense. That's fiscal stimulus on a scale Germany hasn't attempted since reunification.

The ECB is holding rates at 2.0% after December's cut, and the Eurozone is growing (slowly). Full-year 2025 GDP came in at 1.4%, with 2026 projected at 1.2% by the ECB's own staff.

But the German fiscal bazooka should add 0.2–0.5 percentage points to eurozone growth over the next two years, per multiple estimates. Spain continues to outperform quietly at roughly 3% growth. France remains politically fragile, and Italy is muddling through.

Here's what caught my attention most recently in the EU - ECB board member Isabel Schnabel suggested that rate hikes could be back on the table in 2026 if services inflation stays sticky. Services CPI across the eurozone is running above 3%, and with German fiscal expansion pumping demand into an economy near full employment, that inflationary pressure isn't going away. If the ECB pauses for longer or even hints at tightening, then European bank stocks and the euro both have room to run.

The euro at $1.18 is already up 5.3% on a real effective basis year-over-year.

European equities remain cheap relative to the U.S. on nearly every valuation metric. EWG (Germany), VGK (broad Europe), and the defense-industrial complex (Rheinmetall, Leonardo, BAE Systems) look interesting here.

The Bank of England held rates at their most recent meeting, with GDP growth sluggish around 1%. The UK is in a VERY awkward spot and could be in trouble. At the moment inflation is sticky enough to prevent aggressive cutting, but growth too weak to justify holding. Sterling at $1.26 is trading on U.S. dollar weakness more than UK strength. I'd stay neutral here.

China hit its 5.0% GDP target for 2025. Q4 was 4.5% year-over-year. Manufacturing value-added grew 6.1%, keeping China the world's largest manufacturing economy for the 16th consecutive year. On paper, this looks fine.

But Rhodium Group's adjusted estimates paint a less rosy picture. Their analysis suggests the GDP data doesn't square with other indicators:.

Fixed-asset investment dropped 8% year-over-year in Q3 yet somehow wasn't reflected in GDP. Manufacturing investment growth collapsed from 9.2% in 2024 to 1.9% through November 2025. Property remains a multi-year workout with prices still falling, developer distress ongoing, household balance sheets impaired. And CPI inflation is still essentially zero. The GDP deflator has been negative for multiple quarters. This smells like Japan in the mid-1990s, and I don't say that lightly.

The PBOC cut rates on structural tools by 0.25 percentage points and signaled room for further easing. The 15th Five-Year Plan emphasizes tech innovation and manufacturing upgrades - which means more supply-side capacity in a world already drowning in Chinese exports. The trade surplus keeps expanding, which is provoking tariff retaliation from basically everyone.

Vanguard forecasts 4.5% GDP growth for 2026, with tariff drags partly offset by infrastructure investment. The consensus range is 4.0–4.5%.

Could be wrong here, but I still think China is uninvestable for most self-directed investors at current risk levels. The policy tools are fiscal, and the structural headwinds (demographics, property, local government debt) aren't things you fix with stimulus checks.

Japan is where it got wild in January. Prime Minister Takaichi called snap elections for February 8 and pledged to suspend the food consumption tax for two years.

The bond market went berserk. The 40-year JGB yields blew through 4% for the first time since 2007, and 30-year yields hit records near 3.9%. The BOJ held rates at 0.75% at its January meeting (the highest since 1995, after December's hike), but board member Takata proposed hiking to 1% and was voted down 8-1.

The yen is trading around ¥155–157 against the dollar, weakened by Takaichi's fiscal looseness and the political uncertainty around elections. ING expects the next BOJ hike in October 2026, but if the yen breaks ¥160, they'd pull that forward to Q2.

Japan remains a structural bull story - corporate governance reform, reflation through wage growth (Shunto negotiations targeting above 5%), and rate normalization benefiting financials. DXJ and EWJ are still attractive on a 12–18 month view, but expect volatility around the election and any carry-trade unwind episodes.

Taiwan/TSMC continues to dominate global semiconductor manufacturing. Revenue growth remains robust on AI chip demand. South Korea is leveraging semiconductor exports. Samsung and SK Hynix are positioned for the AI infrastructure cycle, though consumer electronics demand remains tepid.

India is running hot and the RBI knows it.

GDP growth hit 8.2% year-over-year in Q2 FY2026 (the September quarter). The RBI held rates at 5.25% at its February meeting after cutting 25 basis points in December. Governor Malhotra called it a "rare Goldilocks period" - high growth, exceptionally low inflation. CPI inflation is running at 1.33%. That's not a typo. One-point-three-three percent.

The big catalyst? India signed a trade deal with the U.S. that cut tariffs from 50% to 18%. It also inked a deal with the EU. Together, these should add roughly 20 basis points to GDP growth, per CareEdge Ratings. The RBI raised its FY2026 growth forecast to 7.4%.

Goldman Sachs expects the RBI to hold rates for at least a year. The case for pause is strong. Currently the rupee is under pressure from narrowing rate differentials with the U.S. (just 1.625 percentage points), and credit transmission from the 100 basis points of cuts earlier in 2025 is still incomplete.

For investors, India is the structural growth story of the decade. But valuations aren't cheap - INDA trades at a premium to most EM peers. I'd be a buyer on any 10–15% correction, not at all-time highs. Infrastructure plays within India (government capex above 3% of GDP) remain the sweet spot.

OPEC+ paused production increases through Q1 2026 - the eight key producers (Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, Oman) confirmed steady output for January through March. But Reuters reported on February 13 that the group is leaning toward increasing production in April, motivated by rising prices from U.S.-Iran tensions and the desire by Saudi Arabia and the UAE to reclaim market share.

WTI at $62 feels artificially low given the geopolitical backdrop. Goldman sees average prices at $52 for 2026, while the IEA expects a 3.8 million barrel-per-day surplus. If OPEC+ opens the taps in April, we could see $50 oil - which would be a massive disinflationary tailwind for the global economy but devastating for energy equities.

And the Saudi-UAE spat over Yemen adds a layer of instability that markets are underpricing. These two countries backing opposite sides in a proxy conflict while trying to coordinate oil production is... not ideal.

Gold at $5,070 is up 74% year-over-year. Central bank buying, particularly China, on its 15th consecutive month of purchases , is the dominant driver. Goldman's target of $4,900 by December 2026 looks conservative given the pace of accumulation. The structural thesis is straightforward: de-dollarization, sovereign debt concerns (U.S. interest payments exceeding $1.1 trillion annually), and an incoming Fed chair who might be more accommodative than Powell. I hold 5% in physical gold and have no plans to trim.

Copper at record highs above $11,700 per ton is signaling something important about the real economy, either infrastructure buildout globally (electrification, data centers, defense) is more robust than GDP numbers suggest, or speculative positioning has gotten ahead of fundamentals. I lean toward the former, but I'm watching closely.

The Warsh transition is the new risk I'm watching most closely. We haven't had a Fed chair transition during a cycle this uncertain since Greenspan took over from Volcker. The market doesn't know what Warsh will prioritize between inflation credibility or growth support. That ambiguity itself is a risk premium.

OVERWEIGHT:

NEUTRAL:

UNDERWEIGHT:

WATCHING:

The big theme for February 2026 is that the old playbook - just buy mega-cap tech, hide in duration, ignore international markets - is fully breaking down.

Rotation is real, gold is screaming a warning about fiscal sustainability, and the smartest investors I follow (Dalio, Druckenmiller) are positioned for a world where the dollar weakens and real assets outperform financial assets. I'm listening.

The Earnout Investor provides analysis and research but DOES NOT provide individual financial advice. Jamie Dejter may have a position in some of the stocks mentioned. All content is for informational purposes only. The Earnout Investor is not a registered investment, legal, or tax advisor, or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.