SETTING THE STAGE
Markets have been anything but calm; they have been disjointed. Volatility has shifted rather than vanished, correlations have weakened, and price movements across assets have grown increasingly episodic. Equity indices hover near their highs, yet leadership is narrow, liquidity uneven, and risk is repriced in bursts rather than sustained trends.
This behavior is often mistaken for stability, but it is not. Disjointed markets signal transition, not equilibrium: a phase where familiar narratives persist even as the underlying structure quietly shifts.
It is also the point in the cycle when early warnings are conveniently forgotten. The forces now unsettling markets; supply constraints, policy-driven inflation, trade fragmentation, and commodity volatility, were not unforeseeable. They were outlined well before they became consensus concerns.
Beneath the surface, the same structural forces we have highlighted in prior reports remain firmly in place: persistent fiscal expansion, constrained supply across real assets, and capital increasingly questioning the durability of financialized returns. This update is not about introducing a new thesis. It is about acknowledging that the existing one is playing out.
The rotation we have been tracking continues; unevenly, episodically, and often masked by short-term macro noise, but its direction remains consistent.
MACRO SNAPSHOT: POLICY FATIGUE SETS IN
Central banks are attempting to balance credibility with pragmatism. Inflation has moderated from its peaks, but it remains well above pre-2020 norms. Rate cuts are now discussed as inevitabilities rather than contingencies, yet real rates remain restrictive relative to trend growth.
Fiscal policy tells a clearer story. Deficits are no longer counter-cyclical; they are structural. The U.S. deficit trajectory has normalized at levels previously reserved for crisis periods. Canada, facing slower growth and rising debt-service costs, is quietly following the same path.
The result is policy fatigue: monetary tools are less effective, fiscal tools are overused, and markets are increasingly forward-looking about the consequences. This is not an environment that rewards duration or leverage.
ASSET PERFORMANCE: LEADERSHIP NARROWS
Equity indices continue to grind higher, but participation has narrowed materially. A small cohort of large-cap names continues to carry benchmark performance, masking weakness across cyclicals, small caps, and rate-sensitive sectors.
By contrast, real assets have resumed leadership after a brief consolidation, but with rising volatility rather than smooth trend progression.
Precious and industrial metals are no longer grinding higher quietly; they are moving in sharp, discontinuous bursts. Gold and silver have experienced repeated episodes of rapid upside followed by violent pullbacks. Copper and other industrial metals have swung aggressively around inventory data, policy headlines, and geopolitical signals.
This volatility is not a sign of failure. It is a sign of transition. When markets move from surplus to scarcity, price discovery becomes disorderly. Physical constraints, thin inventories, and financial positioning interact to produce air pockets in both directions. Historically, sustained commodity bull markets are characterized not by low volatility, but by rising volatility with a positive long-term bias.
Against this backdrop, Bitcoin’s performance has been telling. Despite persistent narrative support as a hedge or alternative store of value, Bitcoin has materially underperformed gold and the broader real-asset complex during this phase of capital rotation. This divergence is not incidental.
Bitcoin remains a liquidity-sensitive, sentiment-driven asset. In an environment defined by fiscal strain, trade fragmentation, and supply scarcity, capital is favoring assets with embedded physical constraint and policy relevance. We highlighted this risk early: when the cycle turns from abundance to scarcity, scarcity must be real.
Equity indices, meanwhile, continue to mask fragility beneath narrow leadership. The divergence between index strength and underlying instability remains a hallmark of late-cycle environments.
CAPITAL FLOWS: SLOW, THEN ALL AT ONCE
Institutional allocation shifts rarely happen cleanly. They begin with hedges, move to rebalancing, and only later become directional bets.
We are currently in the rebalancing phase.
Commodity allocations, while rising, remain well below historical averages. Real assets are being added not as return-seeking trades, but as portfolio stabilizers. This distinction matters. When assets move from “hedge” to “core,” flows accelerate non-linearly.
Importantly, this rotation is occurring without retail participation. Sentiment remains skeptical. That is a feature, not a bug.
CANADA VS. THE U.S.: A GROWING GAP
The divergence between Canada and the United States continues to widen, driven less by macro conditions than by policy choices.
The U.S. retains flexibility: energy exports, deep capital markets, and a willingness to tolerate asset repricing. Canada remains constrained by regulatory bottlenecks and an overreliance on housing as a transmission mechanism for growth.
Infrastructure and net-zero spending ensure baseline demand for materials, but the absence of complementary export capacity limits upside and embeds inflation domestically. This dynamic disproportionately benefits hard-asset producers while pressuring consumers and rate-sensitive sectors.
TRADE, TARIFFS, AND POLICY DIVERGENCE
Trade policy has re-emerged as a structural variable rather than a tactical one, and the prospect of a Trump 2.0 presidency has accelerated this shift.
Under a renewed America-first framework, tariffs are no longer episodic negotiating tools. They are mechanisms to enforce domestic capital formation, protect strategic industries, and constrain geopolitical rivals. Metals, energy inputs, and industrial supply chains sit directly in the crosshairs.
For commodity markets, this introduces a new volatility regime. Tariff announcements, exemptions, retaliatory measures, and national security carve-outs can reprice metals overnight. Supply chains fragment, inventories relocate, and marginal pricing shifts rapidly. Volatility, in this context, is policy-driven.
The U.S. is positioned to absorb this volatility. Domestic energy abundance, fiscal support, and deep capital markets allow it to internalize higher input costs while capturing the investment upside. Canada is not similarly positioned. As a price-taker with limited domestic substitution capacity, Canada experiences tariff volatility primarily through higher costs and weaker external demand.
Trump 2.0 does not represent a return to uncertainty; it represents the normalization of trade friction as an enduring feature of the global economy. Markets are only beginning to price this reality.
The implication is straightforward: higher metals volatility is not cyclical noise. It is the market adjusting to a world where policy, not just supply and demand, sets the marginal price and where the U.S. continues to pull ahead.
WHAT HAS NOT HAPPENED (YET)
Several things typically seen at this stage of past cycles remain absent:
• Broad commodity euphoria
• Meaningful mining and energy CAPEX acceleration
• Retail inflows into real-asset equities
• Policy-driven financial repression
Their absence suggests this is still a developing phase rather than a terminal one.
IMPLICATIONS FOR POSITIONING
This is not a call for dramatic shifts. It is a call for discipline.
Portfolios built for the 2010–2020 environment; low inflation, abundant liquidity, and financial asset dominance, are increasingly mismatched with today’s reality. Incremental exposure to scarce, tangible assets continues to offer asymmetric payoff profiles relative to risk.
Energy deserves particular attention. Oil remains institutionally under-owned and structurally under-invested. After a decade of capital starvation, global upstream supply has failed to keep pace with depletion. Spare capacity is thin, inventories are fragile, and marginal supply is increasingly geopolitical.
A sustained move toward $200+ oil does not require extreme assumptions. It requires only continuity: ongoing underinvestment, resilient demand, and periodic geopolitical disruption. In that framework, today’s prices should be viewed not as elevated, but as transitional.
Historically, oil does not reprice gradually. It gaps higher when the system realizes spare capacity is gone and when it does, it exposes how little protection portfolios actually have.
Selection matters. Balance sheets matter. Jurisdiction matters. The next phase of the cycle will reward resilience over narrative.
CONCLUSION: THE TREND REMAINS INTACT
Cycles rarely announce themselves at their midpoint. They reveal themselves through persistence.
The core signals we have been tracking; capital rotation, supply constraint, policy strain, remain intact. Volatility will return. Leadership will broaden or break. When it does, positioning will matter far more than prediction.
This update is a checkpoint, not a conclusion. The signals that matter are not flashing, they are persisting. When volatility returns and leadership shifts, positioning will matter far more than prediction.
KEY TAKEAWAYS
- Trade policy and tariffs have become structural tools for capital reallocation, favoring U.S. domestic investment at Canada’s expense.
- The U.S.–Canada investment gap is widening, driven by energy availability, regulatory speed, and industrial policy alignment.
- Canada’s growth remains consumption- and housing-heavy, with weak productivity and limited export leverage.
- Real assets continue to benefit from supply constraint and policy-backed demand, even as financial assets mask underlying fragility.
- Oil is structurally under-invested and mispriced; under current conditions, a sustained move to $200+ oil should be viewed as a base-case outcome, not a tail risk.
- This remains an early-to-mid phase rotation, not a terminal one.
About Moneta
Moneta is an investment banking firm that specializes in advising growth stage companies through transformational changes including major transactions such as mergers and acquisitions, private placements, public offerings, obtaining debt, structure optimization, and other capital markets and divestiture / liquidity events. Additionally, and on a selective basis, we support pre-cash-flow companies to fulfill their project finance needs.
We are proud to be a female-founded and led Canadian firm. Our head office is located in Vancouver, and we have presence in Calgary, Edmonton, and Toronto, as well as representation in Europe and the Middle East. Our partners bring decades of experience across a wide variety of sectors which enables us to deliver exceptional results for our clients in realizing their capital markets and strategic goals. Our partners are supported by a team of some of Canada’s most qualified associates, analysts, and admin personnel.