We are finishing 2025, and looking back, almost all the developments of the past year were actually related to international politics. Yes, many central banks lowered interest rates, and many have even reached the end of their reductions, while Japan, contrary to everyone else, started raising interest rates, but to be honest, all the striking events of the year were a result of international politics. And unfortunately, there is not much to be pleased about in what happened. Trump's tariffs and what they call Liberation Day, the day he announced the tariffs, already changed many things in world trade and markets. Then, his statement to Europe, which they consider an ally, to "defend yourselves" surprised Europe and led to a real questioning of NATO's future. In the Russia-Ukraine war, a resolution has still not been reached, but when I spoke with people living abroad, I can say that in Moscow, it is considered certain that the war will end very soon. This peace will affect Europe, as well as the UK and the Nordic countries. The Israeli-Palestinian war, which went down in history as the Twelve-Day War, also caused a short but strong jump in oil prices. Gold and silver, on the other hand, have experienced rallies rarely seen in history.

2026 may not be a repeat of a one-off event like the Twelve-Day War, but no one can guarantee that there won't be another Twelve-Day War. There could even be a US-China maritime confrontation with far-reaching consequences. Geopolitical risks are increasing, not subsiding, and are even accelerating as technological advancements accelerate, urging countries not to fall behind. For these reasons, what happened in 2025 is just a demo of what's to come. Therefore, it's highly likely we'll experience a 2025 that feels like a steroid injection in the context of markets and international politics. Economically, while Germany's proposed defense budget seems to have solved the European economy's problems, it doesn't make much sense. Expecting a budget and focused investment project from just one country to fix the entire region's economy is, in my opinion, somewhat unrealistic. Moreover, the promised investments from Germany haven't even materialized yet.

Making predictions for the new year is becoming increasingly difficult each year. I don't think many people predicted at the beginning of last year that robotics and artificial intelligence would reach this point. Don't immediately say "I did," because then they'll ask why you didn't triple or quadruple your wealth. Ultimately, if you were sure about AI, you would have invested all your money recklessly in this area and multiplied your wealth; 2-3 performing stocks don't fall under this category. Anyway, let's get back to the topic… I'm quite confident we'll see a slight upward trend in inflation in the new year due to tariffs. However, it would be quite a surprise if this reached levels that would affect central bank monetary policy. Furthermore, I don't think this inflation increase will continue throughout the year; I expect to see up and down data in cycles of a few months. This will naturally bring back the "data trading" habit I remember seeing last in 2010/12.

Inflation will likely remain the least of the concerns. The weakening of the US job market has the potential to significantly change life and the economy. This situation will naturally change pricing in the markets. It could even affect the Fed's interest rate cuts. In Europe, however, a slightly different story unfolds. As I mentioned above, a relatively large spending package cannot normalize everything and allow things to proceed as if nothing happened. It seems that a funding package will be needed in Europe, one way or another. This funding might come through QE. Currently, there is talk in the market that the European Central Bank's first move might be to raise interest rates, and even ECB officials are giving signals that they are open to this idea. However, I am on the side that believes the economy does not support this. In fact, I think there is a need for investment in Europe. Therefore, instead of tightening and austerity policies, I think economic support packages may be announced. So, a QE or further interest rate cuts may follow.

China, on the other hand, is in a conjuncture where economic data is partly weak, partly average, but good data is scarce. 2026 will be a year where strong economic support packages will be discussed there as well. Ultimately, it seems we are facing a year in which public debt will increase. What does this mean? This will be a year in which governments issue more bonds, whale sellers roam the bond market, and bond yields may not fall as much as expected despite interest rate cuts. Stocks, however, tend to price in stimulus packages – positively – rather than the lack of interest rate cuts. But before that, we will see overvaluations and the weakening US economy priced in.