Goldman Sachs top traders’ year-end review: Historical highs for gold, silver, and copper; intensified stock-bond divergence; “structural differentiation” in US stocks.......

Goldman Sachs veteran trader Tony Pasquariello pointed out in his year-end review that the global commodity markets performed extremely strongly in 2025. Gold prices rose 68% for the year, silver soared 139%, both marking their best annual performances since 1979, and copper prices simultaneously hit record highs.

Meanwhile, the US stock market exhibited clear structural divergence. Pasquariello emphasized that current equity market pricing implies expectations of cyclical acceleration in the economy, but this has not yet been broadly confirmed by macroeconomic data. In stark contrast, the bond market narrative reflects more caution, with the divergence between signals from the equity and bond markets reaching rare levels in recent years.

He noted that correlation within the US stock market has continued to decline over the past six months, showing a high degree of dispersion, and he expects this feature of low correlation and high diversification to persist into the next phase.

Scott Rubner from Citadel further stated that as the market enters 2026, it possesses a solid macro foundation. Record-high household wealth, an increasing proportion of equity holdings, and ample cash balances together provide structural support for the market, enabling retail investor participation to be maintained at a higher level.

Precious Metals Enter a Historic Bull Market

2025 is undoubtedly a milestone year for the precious and industrial metals markets. Gold prices soared 68% over the year, the best annual performance since 1979. Goldman’s Tony Pasquariello’s analysis suggests that there may be multiple narratives behind this: it could be pricing the globally dominant fiscal regime, a reflection of growing market concerns over the fiat currency system, or simply the result of unprecedented central bank demand.

Silver's performance was even more astonishing, soaring 139% for the year, also registering the largest annual surge since 1979. Looking back in history, silver experienced a legendary five-fold increase in 1979, and this year’s rally clearly approaches that iconic level once again.

At the same time, copper prices decisively broke through historical highs and drove related stocks sharply higher. The collective strength of gold, silver, and copper, the three key metals, clearly indicates that under the current macro backdrop, investor demand for physical asset allocation is seeing a structural increase.

Equity-Bond Divergence Reveals Underlying Market Contradiction

US stock and bond markets are sending distinctly different economic signals. Pasquariello noted that the US 5-year Treasury yield remains tightly correlated with Bloomberg's labor market surprise index, showing that the bond market is primarily anchored to labor market signals.

However, the stock market (represented by the S&P 500 index) presents another picture. It has diverged significantly from business surveys and cyclical indicators, proactively pricing in an “economic cyclical acceleration” that has not yet been widely validated in the data. Pasquariello stressed that his point is not to judge whether equities or bonds are right, but to highlight the risk: if the anticipated cyclical economic acceleration in the first half of 2026 fails to materialize, the current optimistic pricing in the stock market will face adjustment pressure.

Another notable divergence is seen between JOLTS job openings data and the S&P 500 index. The years-long correlation between the labor market and the US stock market may be definitively broken in 2025, marking an important structural change.

Structural Features of US Equities Continue to Strengthen

Within the US market, the pattern of divergence between growth stocks and value stocks continues to deepen. The ratio of the Nasdaq 100 index to the Russell 2000 index for small-cap stocks keeps climbing, continuing the “winner takes all” market feature. Pasquariello analyzed that, although small-cap stocks may see phases of outperformance under potential Fed liquidity support, from a structural perspective, he does not believe small-cap stocks can consistently outperform large-cap stocks led by technology giants.

Regarding market volatility, the S&P 500's six-month realized volatility hovers at low levels, confirming the recent operation feature of high market diversification. The VVIX indicator, which measures volatility of market panic sentiment, sketches out the unique path of sentiment evolution since 2025.

Additionally, the Goldman Sachs Hedge Fund VIP basket has maintained solid long-term performance. Except for a brief deviation during the 2021 meme stock craze, this basket has shown a clear and stable pattern of excess returns relative to the S&P 500 over the long term, making 2025 an outstanding year for the hedge fund industry.

Pasquariello concludes his analysis with the long-term uptrend of the S&P 500 since the pandemic low. Despite the market once again undergoing a test of intuition versus reality in 2025, US equities ultimately extended their long-term upward trajectory. The key current issue is, as the index approaches the upper edge of this long-term trend channel, how the market’s risk-return profile will evolve.

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