Stocks Up, Gold Soaring, Bitcoin Lagging: What the New Market Regime Means for Investors

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To investors,

Professional investors care about their returns and they care about the correlation in their portfolio. The return measures how much money they are making, while correlations measure how much pain they could feel if a recession or financial panic sets in.

The former shows you upside and the latter illuminates potential downside.

This is important right now because we are living through a regime change in asset correlations. Remember, we saw all assets (stocks, bitcoin, gold, etc) go higher together in 2021, they all fell in unison in 2022, and these assets collectively recovered very aggressively in the last few years. Just like a hand in a glove, these assets ebbed and flowed with each other.

That is starting to change though. Take a look at the performance of various assets over the last 12 months:

* S&P 500: +12%

* Gold: +59%

* US Treasuries (TLT): -1.25%

* Bitcoin: -10%

There are a few major takeaways from these data points. First, US treasuries continue to be a money-losing proposition over the short and long-term. TLT is down more than 40% over the last 5 years and it is negative over the last 12 months too. Second, stocks and gold have done very well in light of the return to monetary easing and misplaced inflation fears. Add in the AI boom for the equity market and it has been a great year for anyone holding these assets.

In fact, Adam Kobeissi explains how strong the current stock market momentum is:

“The S&P 500 has finished positive for 7 consecutive months, the longest streak since 2018. Over this period, the S&P 500 has gained +23.9%. This is also in line with the rallies seen in 2009, 2013, and 2021. Meanwhile, the Dow has seen 7 straight monthly gains, the longest streak since early 2018. With December historically one of the strongest months for the market, upside momentum is strong. The bulls are in control.”

This brings us to bitcoin. The digital currency has been a big disappointment performance wise for many investors in 2025. The widely held belief was that bitcoin would continue the 4-year cycle, including a big blow off top in Q4. Instead, bitcoin is down double digits over the last year and to throw salt in the wound, bitcoin’s dismal performance has been against the backdrop of equities and gold doing so well.

Look at this chart from Justin Gallum. It shows that gold has continued to track M2 global liquidity, while bitcoin departed in the opposite direction sometime in Q3 of this year.

This brings us back to correlations. Investors want to add non-correlated assets into their portfolio so they can increase their risk-adjusted return and reduce the volatility of their investments without giving up potential returns.

The general thesis is that various assets have different demand drivers. For example:

* Stocks → driven by earnings & liquidity

* Gold → driven by real rates & currency strength

* Bitcoin → driven by liquidity, adoption, risk-on sentiment

* Farmland → driven by crop yields & climate

* Art → driven by collector demand

This is why you constantly hear financial advisors yell about diversified portfolios. They are playing a spreadsheet game that attempts to decrease risk without sacrificing returns. Of course, that is not what actually happens in the real world.

You actually have to increase risk and volatility in a portfolio to optimize for total returns. You quite literally should be getting paid for the risk you are taking. But that is not how all investors think. They instead will look at a comparison of these various assets and see that gold’s one year performance is high, the one year volatility is low, and both the one and five year Sharpe ratios are superior.

This is a dream for many investors. The question is whether the dream can continue or if nightmares are right around the corner. If you have been listening to me throughout the year, you probably know I am very optimistic about the next few years in financial markets.

Public equities are poised to continue moving higher. The AI boom is very real and likely only beginning. The fact that our politicians can’t stop spending money means that gold and bitcoin will continue doing well. And maybe the only asset I am bearish on for the next 2-3 years is US treasuries, which seem to be designed to go down forever in value.

Time will tell if I am right or not. But in the current moment, we are watching the breakdown of correlations. Assets are not moving in lock step like they were in recent years. This creates more opportunities for investors to create outperformance…or to underperform the market. Let’s hope each of you is on the right side of that outcome.

Hope everyone has a great day. I’ll talk to you tomorrow.

- Anthony Pompliano

Founder & CEO, Professional Capital Management

What I Really Think About Bitcoin, Inflation and Economic Policy

Anthony and John Pompliano dig into whether markets have truly bottomed or if more pain is coming.

They break down the economy, inflation, rates, politics, and immigration — and how all of it is shaping investor psychology right now. Plus, they unpack Mike Green’s argument that America’s real poverty line may be closer to $140,000 than $31,000.

Enjoy!

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