STOCK MARKET & ECONOMIC COMMENTARY – NOVEMBER 2025

“The desire for gold is not for gold itself but for the means of freedom and benefit.” – Ralph Waldo Emerson (May 1803 – April 1882), American essayist, poet, and philosopher. His influential works, such as ‘Self-Reliance and Nature’, reshaped American thought and literature.

The price of gold… what is it telling us?

Gold is a heavy metal, and it must be handled with care. Visitors to the New York Fed’s vaults who want to hold a gold bar must wear specially reinforced shoes; otherwise, if they drop the bar, they might no longer have a foot.

This is relevant as the gold price recently dropped by more than 5% in one day. In dollar terms, the fall of $230 is the greatest ever. The chances are that somebody out there has a crushed foot.

Any move this sudden and drastic must be taken seriously. But it also needs context. This is not a crash or even a correction. Gold’s phenomenal year continues. Even after this sell-off, gold has easily beaten the S&P 500 index and most other stock markets this year.

When the gold price moves around, chin-stroking market sages mobilise to figure out why. What is it telling us? Does disaster lie ahead, or better times, or just more of the same? Speak to us, O shiny ancient element of our ancestors, for you hold both wisdom and truth!

But when you think about it, it’s a bit weird. It’s just a metal, a pretty one without question, but not a very useful one. For true believers though, it is more than just an investment; it is a way of life, the cornerstone of an entire personality. It taps into something much deeper and holds a special place in the hearts of investors.

The spectacular ascent in the price of gold this year has been a huge source of excitement and the subject of acres of deep analysis, as though, if we can only just figure out why, it will unlock knowledge that we can apply to broader investment strategies.

But could this just be a global outbreak of huge overthinking?

The price of gold has ground higher pretty much without interruption since September 2022, a few months after Russia’s full-scale invasion of Ukraine and, crucially, after US authorities retaliated by freezing Moscow’s dollar assets. It clearly makes sense for other countries to back away from dollars and move into gold to shield themselves from a similar fate if the US were to seek retribution for any reason. This is particularly true in relation to China.

But this year, all sorts of additional after-the-fact explanations have sprung up, including that investors are so terrified of inflation, or specifically of fiscally incontinent governments inflating their way out of their debts, that they have herded into gold as an alternative. Some investors have also been bulking up on gold as a hedge against bad outcomes in government bonds, geopolitical uncertainty, US dollar decline, or a stock market crash.

It is also important to consider just how popular gold has been with have-a-go retail investors, a group that in aggregate explains a large chunk of the ascent in its price this year.

In the UK, demand was so rampant that the website for the Royal Mint, where you can buy precious metal items from the size of a SIM card to the size of a gold bar, has been creaking under the strain. Anyone trying to log onto the site from the sofa while watching Strictly Come Dancing a few Saturdays ago would have seen a notice saying in effect, “Computer says No!” Would-be buyers were parked in a queue before they could place a trade.

The FT reported that Stuart O’Reilly, markets insight manager at the Royal Mint, commented that traffic to the site had been running at roughly double the levels of last year and the value of purchases had been running at four times last year’s pace.

Retail investors in Australia and Japan were recently reported to be queuing around the block to buy gold bars and gold coins.

The truest rule in markets is that things go up in price when you have more buyers than sellers, and just before the recent fall, the Royal Mint had 10 buyers for every seller. It is usually more like 3 to 1.

Given all that, it should come as no surprise that the gold price has become a little unstable in recent weeks. This sort of frenzied pace of demand rarely lasts forever and even more rarely moves in a straight line. After hitting a peak of close to $4,400, up 65% this year alone, the price lurched lower, falling back to under $3,900. But after surging nearly 30% in the previous eight weeks, the fall is only a flesh wound and merely takes the speculative froth out of the market. Industry executives caution that further volatility lies ahead, but also think that this is no more than a healthy correction and sets the scene for further gains in the coming months.

What does all this mean? What is it telling us? Is there some hidden meaning behind the price movement of this ancient, mysterious metal?

But instead of building fancy arguments about the debasement of currencies or the resetting of geopolitics, sometimes the simplest explanations are the best. The ancient treasure of our ancestors could simply be telling us that the biggest driver behind the metal’s ascent this year is nothing more than the irresistible allure of a line on a chart heading up from left to right.

“I’m forever blowing bubbles”… stock market crashes

“The four most dangerous words in investing are ‘This time it’s different’, but sometimes it actually is” – Sir John Templeton (1912-2008), American British investor, fund manager, and banker.

Tidying up my office desk drawers a couple of weeks ago, I found some old notes from the late 1990s (yes, I keep everything!) about the internet. It was at the time when technology, media, and telecoms (TMT) shares were shooting skywards.

By the year 2000, commentators were screaming “Bubble”.

In a creeping sense of déjà vu, talk of bubbles in technology stocks is once again in the news. Are there lessons to be learned from all those years ago? Possibly, and chief among them is not to throw the baby out with the bath water.

Earlier this month, US chipmaker Nvidia became the first company in the world to reach a market value of $5 trillion, equivalent to £3.8 trillion. At this staggering valuation, Nvidia’s shareholders could buy every one of the 600 or so companies in the UK equity market.

Over the last three years, Nvidia has evolved from a niche graphics-card designer to an AI behemoth, with the boom in AI driving demand for its chips. You get a sense of the scale of enthusiasm for AI from the fact that Nvidia reached a market value of $1 trillion in June 2023, hit the $4 trillion level three months ago and then reached $5 trillion, before falling back by 6% or 7% in a classic profit-taking few days.

It’s not just Nvidia’s shares that have benefited from AI euphoria. The so-called Magnificent Seven US tech giants, which include the likes of Apple, Microsoft, and Alphabet alongside Nvidia, now account for a massive 22% of the MSCI World index.

Such stellar outperformance has prompted talk of an AI bubble, and investors have been asking: Are stock markets too high? Is a market crash imminent?

Anxiety about stock market valuations is not new. For the best part of a decade, voices have suggested the S&P has become detached from fundamentals. Those voices have reached fever pitch in recent weeks, and financial pundits have become vociferous in predicting a stock market crash. Of course, anyone who correctly predicts a crash becomes an overnight hero, but if they are wrong, which they often are, nobody remembers.

Investors returned from their autumn holidays to be haunted by previous stock market crashes. Lying on a beach sipping pina coladas in the sunshine without a care in the world, absolute bliss, but suddenly, when they return to the office, old fears resurface and a gloom descends.

These fears aren’t completely irrational. The autumn/early winter months have been littered with the bursting of bubbles and stock market crashes. Investors have never forgotten October’s Black Monday in 1987, the Lehman crisis in 2007, or the bursting of the dot-com bubble through the end of 2000 and into 2001.

So, it is little wonder that some investors have become fixated on bubbles and stock market crashes.

History, however, can paint a more nuanced picture. Over the last 75 years, the S&P 500 has risen in the six months from October to April, 80% of the time. Average returns in this period are about twice those of quarters two and three. And research by Deutsche Bank shows that web searches for “stock market bubbles” peaked in mid-October, suggesting that the bubble in bubble fear has already burst.

Tech valuations are not as high today as they were in the 1990s. Unlike some of the big players in the dot-com boom, today’s tech majors have huge revenues and massive profits. Nvidia’s profits, for instance, are $73 billion and counting, and the company’s return on equity is an impressive 120%. Microsoft’s shares looked stretched but not ridiculously so, bearing in mind profit margins and return on equity are not dissimilar to Nvidia.

AI spending as a proportion of total capex is high, but the spending is being funded from cash flows and profits rather than debt. As a result, banks are less involved in the provision of capital than in the dot-com era. This reduces the risk that an AI bust could bankrupt many tech behemoths and, by hitting bank profits, collapse bank lending. Given their low levels of debt, strong balance sheets and other established sources of income, the tech majors are better placed to absorb a hit to valuations than many of the dot-com players.

Caution, not crisis

“Crisis is the spark; caution is the compass. One ignites reaction, the other guides response” – Anonymous.

For all the distortions and risks they cause, stock market bubbles can be beneficial.

The biggest question for global investors at the moment is the longevity of the current AI capex binge and whether businesses are going to make serious money from it. When superintelligence automates the discovery of knowledge itself, economies will expand at even faster rates. PwC’s global artificial intelligence study expects AI technology to boost GDP by 26% in China, 15% in the US and 10% in Europe by 2030. Astonishing figures.

Though US valuations do look lofty, corporate earnings back up rising prices. The underlying earnings picture is still strong, and there are regions delivering genuine earnings growth. Many markets currently have high price-to-earnings multiples relative to their historical averages, but this is justified by higher-than-average returns on equity. So, while current valuations are elevated, so too are earnings and returns on equity, suggesting that investors are paying for quality and value.

And most important of all is that interest rates are now falling, not rising. The event that triggered the dot-com collapse all those years ago was the Fed increasing rates to cool an overheating economy and dampen down on inflationary pressures. At the moment, the Fed and most other central banks are cutting interest rates.

My notes from the late 1990s were inspired by an investment presentation about the long-term investment thesis underpinning the advances in technology. Internet access became a global phenomenon that transformed our lives. However, the forecast profits took much longer to arrive than expected.

AI has similar potential – and risks – so it’s not surprising that investors are getting excited, sometimes, overexcited. But corporate profitability and productivity are already improving exponentially, and calling the top may not be necessary. Bubbles are only ever truly identifiable in the rearview mirror.

Staying invested can invariably be more profitable than pulling out of the market too early. Overall, due to our deliberately chosen active fund managers, our active asset allocation decisions, and our diversification away from the US and particularly the Magnificent Seven, we are optimistic about the long term.

Whilst it pays to be cautious, listening to the perpetual bears could make you poorer as well as depressed.

Please click here to access The Clarion Investment Diary for November with full details of the Clarion Portfolio Funds.

I would like to thank all our clients and introducers for your continued support.

As this will be the final edition of the Clarion for 2025, I would also like, on behalf of all my colleagues at Clarion, to wish you and your families and friends a very merry Christmas and a happy, successful, and healthy 2026.

The next edition of the Clarion will be in January, and we look forward to updating you regularly throughout 2026.

We invite you to get in touch if you have any questions.

Keith W Thompson

Clarion Group Chairman

November 2025

Creating better lives now and in the future for our clients, their families and those who are important to them.

Risk Warnings

Any investment performance figures referred to relate to past performance which is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy. The value of investments, and the income arising from them, can go down as well as up and is not guaranteed, which means that you may not get back what you invested. Unless indicated otherwise, performance figures are stated in British Pounds. Where performance figures are stated in other currencies, changes in exchange rates may also cause an investment to fluctuate in value.

The content of this article does not constitute financial advice and you may wish to seek professional advice based on your individual circumstances before making any financial decisions.