For much of the past three years, the stock market has told a story of momentum and technological promise. But beneath the surface, the broader economy is losing steam. U.S. gross domestic product, the government’s broadest measure of output, slowed to a 1.4% annualized pace in the fourth quarter of 2025, down sharply from 4.4% the prior quarter. Even as growth cooled, inflation remained stubborn. Inflation, as measured by the Personal Consumption Expenditures price index, increased 3% year-over-year in December, still well above the Federal Reserve’s 2% target.
That softer backdrop has yet to fully register on Wall Street. With the S&P 500 up 64% over the past three calendar years and megacap technology stocks driving much of the advance, valuations remain historically elevated. Mark Zandi, chief economist at Moody’s Analytics, recently warned that when stretched markets meet a softening economy, a downturn in stocks can ripple through to the broader economy.
Goldman Sachs argues that a meaningful market drop represents one of the most significant near-term risks to the economy. A 10% market correction would dent household balance sheets, while a 20% bear market could materially weaken the “wealth effect” that has helped sustain consumer spending in recent years. Add in uncertainty over tariffs—the Supreme Court struck down key levies, and a temporary 15% global tariff was imposed—and companies face a murkier outlook for costs, hiring, and long-term planning.
Geopolitical tensions and rising federal debt add another layer of strain. Bridgewater Associates founder Ray Dalio has argued that the post-1945 global order is fraying under the weight of great-power rivalry and an almost $39 trillion national debt. In volatile times like these, gold has often served as a hedge within diversified portfolios. JPMorgan recently projected that the metal could reach $6,300/oz. by the end of 2026, citing sustained demand from central banks and private buyers seeking stability during uneasy markets.
