Jan 28, 2026
• Beyond the Davos rhetoric, markets are moving towards Canada PM Carney’s vision of a polycentric world shaped by changed capital flows and state balance-sheet credibility.
• Precious metals (Gold +9%) , LatAm equities (+5%), and non-USD currencies are signalling regime change, not cyclical noise.
• Portfolios should reduce US concentration and increase exposure to real assets, funded EM growth, and trusted currency blocs
The annual World Economic Forum (WEF) meeting in Davos, the small Swiss alpine town, once again failed to provide strategic signals. Although it produced a high volume of words, much of the discussion was backward-looking, performative, or overtly calibrated to US domestic politics. While that matters for Washington, it matters far less for the rest of the world. Markets treated the event accordingly, with major equity indices trading sideways. Volatility failed to break out. Bond markets continued to trade supply, inflation persistence, and term premia rather than political intent.
Canada’s Mark Carney Frames the Future
Davos had a showstopper in Prime Minister Mark Carney, who provided the only credible forward-looking framework offered at the conference. His message was clear and timely. It felt like the beginning of a new world order and perhaps rightfully so. The global system is no longer best understood through a US-centric lens; it cannot be deciphered through binary Cold War logic either. Rather, we need to see it as an increasingly polycentric world in which fiscally credible, institutionally strong countries can form collegiate blocs and act with confidence. To anchor his argument, Carney noted that Canada, together with the Nordic economies, would represent a trading bloc with close to US$4 trillion in GDP, comparable in scale to a G7 economy, with high human capital, deep capital markets, and strong balance sheets.
That framing matters because it gives political leaders permission and scope to move forward. The world cannot afford to be dominated by US political noise, nor can it wait for coherence from Washington before acting. In fact, markets have already shown the willingness to look past US dominance. Since 2022, the Canadian dollar, Norwegian krone, and Swedish krona have consistently outperformed the broader dollar index during periods of fiscal stress, accompanied by steady real-money inflows. Polycentricity is no longer theoretical. It is observable in prices and flows.
US Economy Remains Robust
US economic data continues to resist the recession narrative. Labour markets remain firm by historical standards. Q4 GDP numbers confirmed that consumption is slowing but not collapsing, with growth running close to a 3% annualised pace. Corporate earnings guidance has moderated without tipping into margin panic. Growth is decelerating but remains on its feet and will likely remain supported for several quarters, thanks to the fiscal giveaways. However, as has been the case since 2008, growth is being achieved without financial discipline.
Current Financial Conditions Biased to Tightening
Financial conditions, however, are tightening through less familiar channels. US Treasury yields drifted higher again last week, driven less by growth optimism and more by duration risk and fiscal supply. The ten-year yield briefly tested 4.30% before settling around 4.23%, levels that markets are increasingly sensitive to.
More telling has been the dollar’s behaviour. Rising yields normally support the currency, but that is not the case this time. A softer dollar alongside firmer yields has historically signalled unease around fiscal policy rather than confidence in growth. Those concerns include large deficits late in the cycle, heavy Treasury issuance, and less consistent foreign demand at the margin.
None of these points to an imminent crisis. It does, however, mark a significant shift. The United States is no longer the unquestioned absorber of global savings at any price. Markets are reintroducing discipline through term premia and currency valuation, doing some of the tightening on behalf of the Federal Reserve.
Latin America Gains
The most decisive market move of the week was in Latin America. Equity markets across Brazil, Mexico, Chile, and Colombia rallied sharply, accompanied by currency strength rather than the usual offset. Several LatAm markets posted mid-single-digit gains on the week. That combination is rarely accidental.
Chart 1: MSCI Latam vs S&P500 (TR)
Rebased to Jan 2021=100
Source: Bloomberg, Sanctum Wealth
Valuations remain compelling, with many Latin American equity markets trading at material discounts to developed peers despite healthier sovereign balance sheets. Inflation trajectories in Latin America have improved, allowing real rates to remain attractive and opening the door to gradual easing. Mexico, for instance, continues to benefit from near-shoring as US corporates diversify supply chains.
Commodity exposure added ballast
Energy prices stabilised. Industrial metals firmed. Agricultural exporters benefited from currency appreciation driven by capital inflows rather than speculative spikes. Flow data suggests long-only emerging market funds reallocated at the margin away from Asia and back towards Latin America after several years of neglect.
Currency Markets Delivered One of the Clearest Signals of the Week
The Australian dollar, Swiss franc, and Singapore dollar all strengthened despite very different economic models. The common factor driving the gains was credibility.
Australia benefited from stabilising Chinese demand expectations and a recalibration of rate-cut assumptions. Its terms of trade remain historically elevated, supported by structural pension flows. The Swiss franc strengthened not as a reflexive risk-off hedge, but as a balance-sheet statement. Switzerland’s fiscal discipline and current account surplus stand in sharp contrast to widening deficits elsewhere.
The Singapore dollar is perhaps the cleanest expression of polycentric capital flows. The country offers little yield but exceptional stability. Strength in the currency reflects inflows into Asian trade finance, private wealth balances, and regional headquarters activity. Since 2020, Singapore’s FX regime has delivered lower volatility than most G10 currencies while attracting persistent net inflows.
Chart 2: Sing Dollar, Swiss Franc, Norwegian Kroner rally against the Dollar
rebased to Jan 25=100
Source: Bloomberg
Precious Metals Strengthen
Gold and silver extended their rally last week, reinforcing a trend that has been building quietly for months. Gold rose by roughly 9% on the week, while silver gained approximately 13%. The character of the move matters. Volatility remains contained. ETF inflows are steady rather than speculative.
Chart 3: Gold and Silver Uni-Directionally Higher
Source: Bloomberg
This is not crisis hedging; it is insurance. Gold historically performs best when real yields peak and fiscal uncertainty rises. Persistent central bank buying continues to provide a structural floor, particularly from emerging markets diversifying reserves away from dollar assets. Official sector purchases since 2022 remain well above pre-pandemic norms.
Silver’s participation in the rally reinforces the point. Silver tends to lag in pure fear trades and outperform when investors hedge monetary risk without abandoning industrial optimism. The narrowing gold–silver ratio suggests caution, not capitulation.
The Implications for Portfolios are Clear and Actionable. Investors Should:
If there is one underlying theme emerging at pace – Capital is no longer waiting for political alignment. It is allocating around credibility
