Jurrien Timmer

Jurrien Timmer

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Dir. of Global Macro @Fidelity. Student of history, chart maker, cyclist, cook. Helping investors break thru the clutter. Views are mine. http://fidelity.com/socialAM

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Sharing this chart showing the inflation-adjusted market capitalization of gold and silver since 1900, with Bitcoin added in 2010. The bubbles show the 5-year price inflation rate (CPI) and the shading show the 5-year monetary inflation rate (M2). Gold is at $35 trillion, and silver and Bitcoin are at $1.8 trillion (using some creative assumptions on my part to determine the “above ground” supply of silver). It’s amazing to me that it took Bitcoin 18 years to reach a market cap of $1.8 trillion it took silver five millennia. Apples to oranges of course, but still.

The bond market, precious metals, and currencies seem on edge, and as the chart shows below, there’s a bit of déjà vu with regards to the interplay of the 10-year Treasury yield, the dollar index, and gold. Tariffs or not, the world order is changing from a dollar-only standard to multiple spheres of influence, and the markets are taking notice. In fact, one could argue that all commodities are becoming strategic assets in this multipolar world. The chart below remains one of the more compelling ones out there. the move higher in yields and lower in the dollar are a mere echo of what we experienced in April. For instance, currency volatility is a fraction of what it was in April. But directionally, the currency move movements are worth noting.

There’s a lot of bubble talk out there, but in my view it’s still early days. Below I show my 1998-2000 analog with the valuation of CSCO back then overlaid on the valuation of NVDA today. Those are the then-and-now poster children of the internet and AI booms. As you can see, we

The fact that the Fed is about to cut rates while animal spirits are rampant brings to mind the post-LTCM easing cycle in late 1998. The Greenspan Fed cut rates three times even though the market was strong and there was no recession. The rest is history, of course. In fact,

The Fed is meeting this week and is widely expected to cut rates by 25 bps. There is some buzz around a 50 bps cut, but I think that’s unlikely. Unlike a year ago when the Fed had some catching up to do after raising rates well into the restrictive zone, the Fed is very close

Does it make sense for bonds to be at the bottom and gold, international equities, US large caps, and Bitcoin to be at the top? Yes! The combination of an AI boom, US fiscal dominance, and a catalyst for non-US mean reversion should yield exactly this outcome.

Perhaps gold has been eyeing a new era of fiscal dominance since 2022, when it stopped trading on real rates and started trading on the dollar’s eroding hegemony. With the US dollar now comprising 54% of all reserve currencies and 58% of allocated reserves, gold’s share of all reserve assets has more than doubled since 2015, from 6% to 15%. The chart below shows that gold has been taking market share from fiat reserves, including the Dollar and the Euro. In fact, gold has now become the second largest reserve asset behind the Dollar and just ahead the Euro.

With both liquidity improving per the global money supply and the stock market reaching new highs, it’s no surprise that Bitcoin is on the move again. Both Dr. Jekyll and Mr. Hyde are being supported for now, and Bitcoin should be at new all-time highs soon enough if this momentum continues. Bitcoin continues to be straddled by my demand model and the power curve of its wallets. Up and to the right.

For equities, an important regime change appears to be underway between US and non-US markets. We all know the valuation story, with US equities trading at a 21x P/E-multiple while the rest of the world is at 15x. That spread has been justified by the superior fundamentals of the S&P 500 (driven by the Mag7), in the form of better earnings, better margins, and higher payouts. We have all been waiting for that mean reversion to kick in, but that requires a catalyst (in the form of earnings) that until recently had been missing. But a regime change appears to have begun. Below we can see the markdowns in US earnings estimates in recent months, as analysts priced in modest tariffs. Those estimates are now starting to improve a bit as the market has swung from left tail to right tail. But look at the estimates below for the MSCI EAFE index. They are being marked up at a significant pace, much more so than US estimates. The next chart shows both sets of estimates on the same scale. A clear convergence is underway, amplified by the above mentioned valuation spread as well as the falling dollar. TAMA indeed.

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