Lawrence Tan: Shifting Rate Expectations and Global Equity Volatility

Amid recent market turbulence, gold prices posted their largest two-month gain, reigniting investor interest in safe-haven assets. Weak U.S. employment data and shifts in trade policy have prompted a reassessment of the future path of interest rates. These developments underscore the uncertainty prevailing in global markets and challenge traditional asset allocation frameworks. Lawrence Tan begins with the underlying drivers of the rally of gold, then expands on how interest rate expectations are shaping equity markets, and finally explores how investors should approach portfolio management in this evolving environment.

The Macroeconomic Signals Behind the Rebound of Gold

Gold prices surged recently, climbing 2.2% in the last trading session — the largest single-day increase in two months — drawing widespread market attention. According to Lawrence Tan, the strength of gold reflects a direct response to global macroeconomic shifts. The latest U.S. employment report fell significantly short of expectations, with a marked slowdown in job creation. This data point has materially altered the expectations of the market for Federal Reserve policy, with a growing consensus that the rate-hiking cycle may end sooner than previously anticipated — and even give way to a rate-cutting trajectory.

Lower rate expectations have increased demand for non-yielding assets, driving up the price of gold. Lawrence Tan also notes that the recent uptick is bolstered by U.S. tariff measures, which have intensified global economic uncertainty through renewed protectionism. In the face of heightened trade tensions, investor risk appetite has diminished, prompting capital to flow into traditional safe havens such as gold.

The rally in gold reflects the acute sensitivity of investors to slowing growth, policy shifts, and geopolitical stress. Lawrence Tan emphasizes that the current momentum of gold is grounded in genuine macro risk considerations, making it a meaningful signal for portfolio construction.

The Interest Rate–Equity Market Trade-Off

Against the backdrop of the strength of gold, equity markets have weakened. Lawrence Tan explains that this divergence highlights how investors are reassessing the trajectory of interest rates and corporate earnings. Following softer labor data, markets have increased their bets on potential rate cuts, which theoretically supports equities. However, while lower rates may boost valuations, they also imply sluggish economic growth, thereby undermining actual corporate profitability.

The equity pullback reflects an adjustment to shifting macro expectations. Sectors such as technology and consumer discretionary — highly sensitive to economic sentiment — have begun to show signs of capital rotation into safer assets. Lawrence Tan observes that many investors are reevaluating the viability of high-valuation segments and adopting more conservative value-based approaches, favoring companies with stable cash flows, such as infrastructure plays and high-dividend stocks.

From a technical standpoint, major equity indices are now hovering near key support levels. Absent a material policy boost or a rebound in economic indicators, there is a risk of renewed selling pressure. Lawrence Tan advises investors to avoid being swayed by short-term sentiment, and instead ground their positioning in fundamental and liquidity dynamics to build a resilient medium- to long-term portfolio structure.

Portfolio Allocation and Risk Management

With macro variables shifting rapidly, markets are entering a new phase in which uncertainty becomes the norm. According to Lawrence Tan, the rise and equity market volatility of gold reflect divergent views on the future economic path and policy mix. The era of outsized gains from single-asset bets is fading, making asset allocation strategies more vital than ever.

Lawrence Tan stresses that risk control must now take center stage in portfolio construction. Investors should develop forward-looking capabilities grounded in macro logic and capital flow analysis. For institutional investors with long-duration liabilities, the focus should be on acquiring counter-cyclical assets during periods of ample liquidity to hedge against sudden shocks. Prudence, flexibility, and discipline will ultimately determine investment success.