What does it mean that the US stock market and gold have both reached new highs?

Release Time：2025-09-23

Overnight, Nvidia's huge investment in OpenAI once again ignited the AI craze, pushing the three major US stock indices and the Philadelphia Semiconductor Index to successively hit new highs, and market sentiment was high.

Spot gold also soared, reaching a record high of $3,748.84 per ounce at one point.

Has the contradictory and rare situation where risky assets and safe-haven assets have simultaneously climbed to historical highs made investors doubt whether the market has been "perfectly priced"? Has it fully reflected all the positive factors and will it not rise further in the future?

According to the Chui Feng Trading Desk, a research report released by Deutsche Bank on September 22nd holds that although risky assets have shown significant resilience recently, the market is far from reaching a "perfect pricing" state, and the view that "there is almost no further room for the market to rise is wrong."

Henry Allen, an analyst at the bank, believes that the current market is far from being "perfectly priced", but is instead filled with concerns about future risks. However, this also provides room for potential market increases. In other words, if these priced risks fail to materialize or the situation is better than expected, the market may instead have further upside potential.

For instance, the record high gold prices, persistent inflation and tariff concerns, the slowdown in the labor market, and expectations of central bank interest rate cuts all reflect that the market has factored in a large number of potential downside risks.

This contrasts sharply with the view of many people that the current market is compared to the "dot-com bubble" period - when the price of gold was at a historical low and the Federal Reserve was raising interest rates to cope with strong demand.

Deutsche Bank elaborated on five reasons why the market is far from being "perfectly priced" :

I. New Highs in Gold: A Signal of Fear

The first core argument of the Deutsche Bank report is that the gold price is at a historical high, which is a typical sign of market fear rather than extreme optimism. The report emphasizes that gold, as an asset that does not pay dividends or coupons, usually gains more appeal when investors seek safety.

Report data shows that the price of gold, adjusted for inflation, has exceeded its peak in January 1980. At that time, the United States was sliding towards recession under the large-scale monetary tightening policy led by then Federal Reserve Chairman Paul Volcker.

Therefore, historically, high gold prices have often been accompanied by economic turmoil and uncertainty. This stands in sharp contrast to the dot-com bubble period, when the actual gold price hovered at a multi-decade low, reflecting investors' extreme optimism in chasing high-return risky assets.

Second, high inflation expectations in the United States: Far from "perfect"

According to the data of the US inflation swap, the interest rate of the 2-year US inflation swap closed at 2.92% last Friday, which means that the market expects inflation to remain above the target of the Federal Reserve in the coming years.

This means that inflationary pressure is implicitly contained in market pricing, which will limit the Fed's ability to cut interest rates. This is clearly inconsistent with a "perfect" economic picture. If inflation can be lower than expected, it may instead bring potential upside potential to the fixed-income market.

Third, concerns over tariffs persist

The tariff issue remains a major concern for investors.

The report mentioned that in addition to the tariffs already implemented, the United States is still reviewing industries such as pharmaceuticals, semiconductors and critical minerals, which brings the possibility of further imposing tariffs. These outstanding risks are negative factors that the market cannot ignore and have already been reflected in the pricing.

Furthermore, the lack of a permanent agreement means that there is still a risk of a sudden rebound in US tariffs, just as in the recent case where Canadian tariffs were raised from 25% to 35%. According to Xinhua News Agency, the White House of the United States issued a notice on the evening of July 31, stating that US President Trump had signed an executive order on the same day, raising the tariff rate on Canadian goods exported to the United States from 25% to 35% starting from August 1. Canadian Prime Minister Mark Carney expressed disappointment over this.

Four. Concerns emerge in the US labor market: Signs of slowing employment growth and recession

The research report emphasizes that there are obvious signs of concern in the US labor market, especially the slowdown in job growth.

At present, the six-month average growth rate of non-farm payrolls in the United States has dropped to 64,000, hitting a new low since the beginning of this economic cycle. The unemployment rate rose to 4.3%, the highest level since the end of 2021. Furthermore, recent benchmark revisions suggest that the employment data for 2024-2025 May be weaker than previously expected.

The market was highly concerned about this weakness. After the employment report on August 1st significantly revised down the data of the previous months, the spread of US high-yield bonds jumped by 23 basis points on that day, marking the biggest single-day increase since the tariff announcement in early April. This indicates that the market does not simply regard "bad news as good news", but is truly concerned about the risk of an economic recession.

V. Expectations of interest rate cuts by central banks such as the Federal Reserve: Not a sign of a strong economy

Investors generally expect major central banks, especially the Federal Reserve, to further cut interest rates.

The Federal Reserve's futures market has even priced in a further interest rate cut of more than 100 basis points by the end of 2026. The research report points out that this expectation of interest rate cuts is not a signal of a strong economy, but rather more reflects investors' concerns that economic growth may slow down, believing that interest rate cuts are necessary to stimulate the economy.

In contrast to the "dot-com bubble" period in the late 1990s, the strong demand at that time prompted the Federal Reserve to enter an interest rate hike cycle in 1999 to deal with the tightening of the labor market. Nowadays, the Federal Reserve has cut interest rates due to concerns over the labor market, and the real yield on the 10-year term has continued to decline. This is completely different from the market environment at that time.