Back to reality
The year 2026 got off to a flying start, buoyed by optimism bordering on euphoria. Against a backdrop of unanimously positive global growth prospects, equity markets broke record after record, and the parabolic trends that began in 2025 not only continued but accelerated further. This was the case, for example, with the South Korean stock market, which, after rising by nearly 80% in 2025, soared by 24% in January alone. The same was true for precious metals, where speculation intensified after an exceptional year, allowing gold to gain up to 25% in the first few weeks and silver to soar 63% over the same period. At the same time, many positioning and market sentiment indicators pointed to heightened optimism and very aggressive positioning by investors. All this at the dawn of a year fraught with potential pitfalls, after three years of uninterrupted growth.
In recent days, however, a return to reason has set in, sometimes abruptly. The extreme leverage used to speculate on silver amplified its reversal, with the precious metal losing nearly 40% in a matter of days. The Korean market experienced two sharp adjustments, even triggering the activation of the “sidecar” mechanism during the 2 February session. This circuit breaker is designed to stabilise the market in the event of violent fluctuations, suspending the execution of orders for a few minutes. Other sharp corrections occurred in certain pockets of the US market, such as unprofitable technology stocks, which wiped out their strong gains from the beginning of the year in just a few days.
Behind the high volatility of assets, more fundamental concerns have also resurfaced. First and foremost among these are concerns surrounding investments in AI. Announcements by Microsoft and then Alphabet, when they published their quarterly results, of capital expenditure for 2026 significantly higher than anticipated by the consensus worried investors, even though this fear, which had emerged last autumn, seemed to have been digested. It must be said that the amounts involved are impressive. The American technology giants have announced no less than $660 billion in investment in AI, a 60% increase compared to 2025. These amounts raise questions about the profitability of these investments and the sustainability of margins in the sector, especially in a context of increased competition between major language models.
A barrage of poor figures on US employment, including a sharp drop in job vacancies according to the JOLTS survey and the worst January in terms of job losses according to the Challenger, Gray & Christmas report, has also highlighted the fragility of the US economy. The fashionable narrative about the US labour market, summed up by the phrase “low hiring, low firing”[1] , remains valid for now, with unemployment benefit claims remaining very low. But the succession of poor figures and announcements of redundancy plans here and there is gradually chipping away at it.
This return to reality for investors, both through the correction of excessive euphoria and the reconsideration of more fundamental issues, is ultimately beneficial. There is never more danger in the financial markets than when appetite takes precedence over basic rationality. The rapid deflation of inconsistencies is therefore the best way to allow the markets to calmly resume their forward march.