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This week’s spotlight turns to growing tension beneath the surface of global markets. Equity valuations have climbed to levels only seen during the dot-com bubble and pandemic-era rally, while correlations between stocks have dropped to critical lows, a setup that has historically preceded sharp reversals. 

At the same time, the world’s largest institutions are converging on a rare consensus: a weaker dollar ahead. Gold and Bitcoin continue to benefit from this environment, both attracting substantial inflows as investors search for stability amid fiscal and monetary uncertainty.

Here’s what we’ll cover today:

Let’s dive in 👇

As we close out another volatile week in global markets, several key indicators warrant close attention. The S&P 500’s forward price-to-earnings ratio has climbed to roughly 22x, a level surpassed only a few times this century, most notably during the dot-com bubble and the pandemic-era rally. Historically, such elevated multiples have been followed by muted forward returns and heightened correction risk. While strong earnings can justify rich valuations for a time, investors should remain cautious about the sustainability of profit margins and earnings growth expectations at these levels.

Meanwhile, the implied correlation index among S&P 500 constituents has fallen below the critical 8 threshold, a zone that has often preceded market pullbacks and volatility spikes. Low correlations suggest that stock-specific factors are driving returns rather than broad market forces. However, when sentiment turns, such environments can quickly revert to high correlation selloffs. As the chart shows, each dip below this level in 2024 and early 2025 was followed by short-term drawdowns. Combined with stretched valuations and subdued volatility, this breakdown in correlations adds another warning sign that near-term risks may be underestimated.

On the currency front, Wall Street’s largest institutions are unusually aligned in expecting a weaker U.S. dollar by year-end. Major banks project yen strength of 5–7% and euro appreciation of 3–4% into December, reflecting expectations that the Federal Reserve’s tightening cycle has concluded. This consensus confirms a broader shift toward easing global financial conditions and the further unwinding of dollar dominance that characterized the past two years.

Finally, both gold and Bitcoin have continued to attract substantial inflows in 2025. Gold has surged over 40%, while Bitcoin is up roughly 25% on a normalized basis, as investors seek refuge from monetary uncertainty and currency debasement. Bitcoin’s rebound from its spring lows underscores its increasing maturity and resilience, cementing its role as a complementary store of value alongside traditional safe havens.

With fiscal concerns and geopolitical instability still looming, the macro backdrop remains supportive for alternative assets like gold and Bitcoin, both of which stand to benefit if confidence in fiat systems continues to erode.