Thoughts from Themes: Mind over Metal

Markets are moving to a familiar rhythm: fear, resilience, and recalibration. As U.S.–China trade tensions cool from confrontation to conversation, investors are beginning to look past the political noise toward the economic opportunity beneath it. Trump’s softer tone has calmed markets, hinting that diplomacy—not disruption—could define the next leg of global trade.

At the same time, gold’s historic run past $4,200 per ounce reflects deeper structural shifts than mere safe haven buying. Central banks continue to diversify reserves away from the dollar, fiscal pressures are mounting, and real yields remain capped by policy uncertainty. The result is an environment where hard assets and risk assets can rally in tandem, a reminder that monetary and market confidence are increasingly intertwined.

Meanwhile, America’s banking giants are proving that not all safe havens are made of metal. A blockbuster quarter for global systemically important banks underscored the resilience of U.S. financial leadership and a reawakening of deal activity.

Finally, this week’s inflation data and Fed commentary will determine whether gold’s crown holds, or if confidence shifts back toward risk. Either way, the market’s message is clear: in uncertain times, value shines brightest where conviction and caution meet.

Ignore the Noise, Watch the Trade Winds

Everyone on the global stage knows that China has very wobbly legs as far as trade negotiations with the US, and China knows for certain that if the developed world is forced to pick a side, they will pick the US and Trump. The US wants to settle the confrontation with China, and Trump has toned down his rhetoric as an olive branch to the markets. He understands that the stakes for global trade and economic prosperity weigh in the balance, and a volatile stock market risks his legacy as a "peace and prosperity" President. While the noise can sometimes be scary, it's just noise; now real negotiations will take place to reach some middle ground. In the end, China's need for the US as a consumer and the US's desire to keep inflation in check and create supply for its struggling soy

farmers will lead to a deal that works, not just for both parties, but for the world. It's just going to take time and in-person discussion, as opposed to saber rattling statements entered by keyboard on social media.

Bessent will begin the set up for those discussions next week in Malaysia, and Trump will follow with a meeting with Xi Jinping at APAC shortly thereafter.  Investors may be wiser to ignore the thunder of the storm and focus more on the rain watering the seeds of a more fruitful path forward. Once real discussions are had, a new deal should benefit risk assets and put a damper on the safe haven trade for a strong finish to the markets, with both sides claiming victory in the new year.

Gold Glitters & Dollar Drifts

Gold and the U.S. dollar are moving in sharply divergent directions amid escalating global tensions and shifting monetary dynamics in October 2025. Gold has surged past $4,200 per ounce, reaching its highest level since 1979 and gaining over 54% year-to-date. This rally reflects a confluence of factors: investor anxiety over inflation, geopolitical instability, and a weakening dollar. Central banks have ramped up gold purchases, viewing it as a hedge against currency debasement and digital disruption.

The U.S. dollar, meanwhile, faces mounting pressure. Although still dominant in global trade, its relative strength has eroded due to aggressive fiscal spending, rising debt levels, and reduced foreign demand for Treasuries. The dollar’s decline has made gold more attractive to international buyers, amplifying its upward momentum. Interestingly, gold’s rise has defied traditional market logic. It’s climbing alongside equities, rather than acting as a counterweight. Analysts attribute this to fears of an AI-driven asset bubble and the growing appeal of tangible stores of value. The festive season in Asia has also boosted physical gold demand, adding seasonal tailwinds to its price trajectory.

Looking ahead, the interplay between gold and the dollar will remain pivotal. If the Federal Reserve maintains a dovish stance or if trade tensions with China intensify, the dollar could weaken further, potentially pushing gold even higher. However, it's most likely that China and the US come to an agreement that satiates the markets,

and geopolitical de-escalation might temper gold’s ascent. If you believe, like many strongly do, that the AI trade is more revolution than speculation and has many years to run, gold’s rally – primarily lead by investor psychology as a move toward safety, scarcity, and strategic diversification – will most likely stall as investors begin to add risk. The dollar’s trajectory, while uncertain, will be a key determinant of how long gold can hold its crown as the “king of 2025”. At this stage of the trade, we are more constructive on gold miners, which are very profitable regardless of whether gold continues its historic rise.

Investment Banking Revives the Giants

U.S. globally systemically important banks (GSIBs) delivered standout third-quarter results, underscoring the resilience of their diversified models and a long-awaited rebound in deal activity. After two subdued years for capital markets, investment banking surged as corporate confidence returned, and policy expectations turned pro-business under the Trump administration.

All six major banks beat estimates, led by JPMorgan, which posted 9% revenue and 16% earnings growth on broad strength in trading and advisory. Bank of America and Wells Fargo followed with investment banking gains of 43% and 25%, while declining credit provisions reflected solid consumer health. Wells Fargo’s release

from its regulatory cap marked a structural shift, positioning it to compete more aggressively in M&A and lending. Morgan Stanley produced the sector’s highest profitability, with 49% earnings jump and a 23.5% return on tangible common equity, powered by prime brokerage and $81 billion in new wealth inflows. Citigroup achieved record revenue across every business line, signaling progress in its ongoing transformation. Goldman Sachs rounded out the strong quarter with investment-banking revenue up 42%, driven by revived M&A and leveraged-finance pipelines.

Collectively, the results confirmed that U.S. banking giants remain global profit engines even amid trade uncertainty and credit-cycle caution. Rising advisory and trading revenues point to a reawakening in capital markets and renewed investor risk appetite.

Market Movers

This week, keep an eye on unemployment and jobs data, weekly earnings, the JOLTs report and CPI for September. These releases come at a critical juncture, as investors digest the fallout from renewed U.S.–China trade tensions and a surging gold market. The CPI report will be especially pivotal for bond yields and equity valuations. Wage and employment data will help clarify whether inflationary pressures are demand-driven or supply-constrained. With the Federal Reserve signaling caution amid global volatility, this week’s data could shape expectations for future rate moves and asset allocation strategies. Investors should also watch for any surprise geopolitical developments or corporate earnings guidance that could amplify market reactions.

This Week’s Major US Economic Reports & Speakers

Monday, October 20

10:00 AM U.S. leading economic indicators

Tuesday, October 21

9:00 AM Fed governor Christopher Waller opening remarks

Wednesday, October 22

4:00 PM Fed governor Michael Barr speaks

Thursday, October 23

8:30 AM *Initial jobless claims

10:00 AM Existing home sales

10:00 AM Fed Vice Chair for Supervision Michelle Bowman testifies

10:25 AM Fed governor Michael Barr speaks

Friday, October 24

8:30 AM ** Consumer price index

8:30 AM ** CPI year over year

8:30 AM ** Core CPI

8:30 AM ** Core CPI year over year

9:45 S&P flash U.S. services PMI

9:45 S&P flash U.S manufacturing PMI

10:00 AM Consumer sentiment (final)

10:00 AM *New home sales

* Temporarily suspended due to government shutdown ** CPI will be published to determine Social Security COLA

Disclosures:

All data sourced from Bloomberg as of October 18, 2025, unless otherwise cited.

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