The world is once again caught in economic and geopolitical turbulence. Trade wars and real wars dominate the headlines, and uncertainty is at an all-time high. Will we see a fundamental shift in the global order, or just another chapter in the evolving international economic system? Will conflicts in Ukraine or the Middle East find resolutions? No one knows for sure.

In times like these, it’s useful to take a step back and gain perspective. A paper written in 1996 by legal scholar Robert Hudec, titled “International Economic Law: The Political Theatre Dimension,” offers an interesting insight. He analyzed the US announcement of tariffs on $6 billion worth of Japanese car imports in the mid-1990s—a dispute that was ultimately settled before tariffs were even imposed. While the economic impact was minimal, the psychological and political effects were significant. Hudec’s key point? The drama of economic policy often outweighs its actual consequences.

Fast forward to today, and we see similar patterns emerging. Trade tensions, currency shifts, and government interventions are shaping the markets. But beneath the surface, long-term trends are unfolding that could have a much greater impact on global wealth and investment strategies.

Europe yay, US nay

Europe has been widely criticized in US media for its economic struggles. Yet, in 2025, European markets have outperformed their American counterparts significantly. While both regions saw strong markets until mid-February, US stocks have since declined, while European stocks have held steady. Given ongoing political and economic concerns, this resilience may seem surprising.

One major factor supporting European stocks is their long-term undervaluation. Over the past five years, European equities have been overlooked, leading to capital outflows from the region. However, that trend is now reversing. Investors are reallocating funds from the US into Europe, as shown in Bank of America’s Global Fund Manager Survey, which indicates a significant underweighting of US equities.

The US faces rising inflation expectations and deteriorating consumer sentiment, which recently fell to its lowest level since 2013. Meanwhile, Europe offers some glimmers of hope:

• Potential peace in Ukraine: A ceasefire could improve economic stability in Europe, particularly for countries most affected by the conflict.
• Government spending initiatives: Germany has committed €500 billion to infrastructure projects, while the EU plans to invest €800 billion in defense. While government debt is always a concern, these investments could boost economic activity, especially if European companies receive preferential treatment in contracts.
• Deregulation potential: Europe has been criticized for excessive regulation, which has stifled business growth. If reforms reduce bureaucracy, entrepreneurship in the region could experience a revival.

These factors don’t guarantee a long-term European market outperformance, but they provide compelling reasons why the region may continue to attract investment.

The Mar-a-Lago Accord

Following the US elections, the dollar initially strengthened but has since reversed course. By late March, the euro appreciated 4.2% against the dollar, while the Swiss franc gained 2.82% year-to-date. The US Dollar Index (DXY) has declined about 3.75%, bringing it back to levels seen before the election. Over the past five years, currency fluctuations have become increasingly volatile. Under the current government, all signs suggest that the US dollar may continue to lose purchasing power.

In this regard, the idea of a “Mar-a-Lago Accord” was brought up by Stephen Miran. It draws a historical parallel to the Plaza Accord of 1985, when major global economies agreed to weaken the US dollar. Over the next two years, the dollar dropped by 25%, prompting the Louvre Accord in 1987 to stabilize its decline. While today’s economic environment is different, the US government still has an incentive to let the dollar weaken.

The challenge arises when higher tariffs coincide with a depreciating US dollar. According to Stephen Miran, former US Treasury official, the tariffs imposed in 2018 did not lead to significant inflation because they were offset by a stronger dollar. However, if new tariffs are introduced while the dollar is declining, the effect on consumer prices could be much more pronounced. If you impose a 10% tariff on Chinese imports but the yuan depreciates by 10%, the net effect on US consumers is neutral. But if the yuan strengthens instead, that 10% tariff could feel more like a 20% price increase.

This dynamic is crucial for investors to watch. If tariffs escalate while the dollar weakens, the result could be higher import costs and rising inflation, adding further pressure on both consumers and markets.

Germany’s Rising Bond Yields: A Different Story

Germany recently announced increased government spending and a relaxation of its debt brake. Historically, such moves have made investors nervous. A notable example is the UK in 2022 when then-Prime Minister Liz Truss introduced tax cuts and spending plans, causing bond yields to skyrocket and leading to her swift resignation.

Germany’s situation, however, is different. Its debt-to-GDP ratio is currently about 62%, compared to nearly 100% in the UK in 2022 and over 120% in the US today. While German bond yields have risen, this seems to be more a reflection of investors shifting funds from bonds into equities rather than a sign of deep financial trouble.

Looking ahead, long-term debt concerns remain a global issue. The US Congressional Budget Office recently projected that government deficits will rise to 7.3% of GDP and public debt will hit 156% of GDP by 2055. While forecasting decades into the future is inherently uncertain, the increasing debt burden remains a key issue for policymakers and investors alike.

Gold at $3,000 an Ounce: What’s Next?

Gold crossed the $3,000 per ounce mark in mid-March and has managed to hold that level. About two weeks later, silver has also climbed above $34 per ounce—a price last seen in 2012. These price movements bring the performances of these two metals to 16% and 19%, respectively.

The direction of the gold price will likely be influenced by the evolving trade war. If tariffs continue to escalate and lead to a full-scale economic conflict, gold and other safe-haven assets could see further gains. However, if negotiations lead to a diplomatic resolution—perhaps one that is more symbolic than substantive, in line with Hudec’s “Political Theatre” theory—gold could stabilize or even decline as funds shift back into equities.

Historically, trade wars have had mixed impacts on inflation. During the 2018 US-China trade war, inflation remained relatively stable because the dollar strengthened, offsetting the price increases from tariffs. This time, the US dollar is weakening, which could magnify the inflationary effects of tariffs, increasing the appeal of gold and other commodities as a hedge.

For investors, the key takeaway is that uncertainty remains high. Precious metals tend to perform well in volatile environments, but their long-term trajectory will depend on how global economic policies unfold in the coming months.

Final Thoughts

While short-term headlines create market fluctuations, long-term trends matter most for investors. The US is facing economic headwinds, including rising inflation expectations and a weakening consumer outlook. Meanwhile, Europe is experiencing a market recovery that is attracting global capital. At the same time, currency dynamics and government policies continue to shape global investment opportunities.

For those looking to protect their wealth, diversification remains essential. With the US dollar facing downward pressure, Swiss investments, precious metals, and international equities may offer valuable hedges against uncertainty.

As always, staying informed and maintaining a well-balanced portfolio is the best approach in uncertain times.