A recent Markets Pulse survey indicates that a majority of respondents believe equities will deliver better risk-adjusted returns than bonds amid a market environment dominated by international policy developments. Among the 138 participants surveyed between January 28 and February 4, over half identified trade and geopolitical developments as the primary catalyst for market volatility, while 46% pointed to monetary policy. Against this backdrop, nearly two-thirds of respondents expect the yield on the 10-year U.S. Treasury note to rise.
So far this year, the S&P 500 has maintained modest gains despite a mix of influences, including renewed momentum in artificial intelligence (AI), a historic surge and retreat in precious metals, and geopolitical events such as U.S. involvement in Venezuela and former President Trump’s push for American control over Greenland. Although market turbulence persists, selloffs have been short-lived due to strong underlying macroeconomic fundamentals. Uncertainty stemming from trade tensions is gradually receding, and corporate earnings reports continue to show resilience among U.S. companies facing tariff pressures.
Henry Allen, a macro strategist at Deutsche Bank, noted in a Wednesday report, “Investors should distinguish between headline noise and the broadly robust macroeconomic backdrop. Historically, sustained market declines have coincided with a fundamental reassessment of the macroeconomic outlook, but so far, we have not observed concrete signals of such a shift.”
In contrast, U.S. Treasuries have recently underperformed. Investors are preparing for leadership changes at the Federal Reserve, with many concerned that nominee Kevin Warsh’s inclination to reduce the central bank’s balance sheet could trigger significant volatility in bond yields. In past periods of geopolitical instability, U.S. Treasuries—the world’s largest and most liquid bond market—often served as a safe haven. However, new policy risks introduced by the Trump administration, combined with concerns over Fed independence and fiscal sustainability, have substantially diminished the appeal of U.S. debt as a shelter.
At the same time, the emergence of several trillion-dollar market-cap companies in recent years, many of which hold substantial cash reserves, has made large-cap U.S. equities themselves a viable alternative safe-haven asset. Gareth Ryan, Managing Director at IUR Capital, commented, “With the 10-year Treasury yield still hovering around 4%, and risk assets having delivered returns several times that level over the past three years, current yields are simply not attractive.” He added that despite recent declines in the software sector, risk appetite remains at healthy levels.
In the current market environment, the U.S. dollar has also come under pressure. Seventy-one percent of survey respondents expect the dollar to weaken over the coming month. When asked which major market trend from January was most likely to persist, 28% selected dollar depreciation—the second most popular response. Macro strategist Brendan Fagan observed, “The dollar is not out of the woods yet, but the worst-case scenarios appear to be receding. Concerns about an overly aggressive Fed chair have eased following Kevin Warsh’s nomination, and economic data has not indicated a sharp deterioration in the U.S. labor market.”
Additionally, 41% of respondents believe the upward trend in gold is most likely to continue for at least another month. This suggests that, despite recent volatility in precious metals, investor confidence in a sustained gold rally remains largely intact.
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