How 2025's Everything Rally Defied Financial Logic

Sonipat, Dec 4 (360info) The traditional financial logic of the past century dictated that equities were the pathway to growth, representing a bet on a prosperous future, while gold served as a safe-haven, offering insurance against potential disasters. This fundamental dichotomy once guided global capital flows.

However, by 2025, this logic has been upended. A remarkable and counterintuitive phenomenon has emerged in American markets, popularly dubbed an "everything rally," where both risk assets and safe havens simultaneously achieve record highs.

The immense volume of global liquidity has overwhelmed traditional market fundamentals, resulting in a structural breakdown in pricing. Curiously, investors are purchasing both "speedboats" for favorable market conditions and "lifeboats" for adverse scenarios at the same time.

Data reveals that gold futures have surged by 50% year-to-date in 2025. Concurrently, equity markets are seeing record valuations, with the S&P 500's forward price-to-earnings ratio soaring above 25, reminiscent of the 1999 tech boom.

This development indicates a universal influx of capital buoying all kinds of assets. When both safe assets and growth assets simultaneously rally, it suggests that the underlying crisis lies within the liquidity channels themselves, through which central bank reserves are funneled into asset markets.

The origins of this vast liquidity can be traced to the pandemic era's monumental monetary and fiscal measures. The US Federal Reserve, for instance, expanded its balance sheet, injecting over 1 trillion dollars between late 2020 and September 2021.

Furthermore, central banks of the G4 countries—Brazil, India, Germany, and Japan—increased their balance sheets by approximately 20% of GDP within just three months, in stark contrast to the 6% rise seen in the first year of the global financial crisis.

This liquidity surge remains largely unutilized, with over 7 trillion US dollars now idling in US money-market funds, essentially serving as dry tinder poised to ignite speculative flows. (360info.org) SKS SKS