Jonathan Wellum on AI Valuations, US Growth, and Gold's 2026 Outlook

Market Surprises and AI Valuations

• 💡 The most surprising market performance in 2025 was in precious metals, with silver exceeding expectations and gold seeing significant gains.
• ⚠️ AI stock valuations also raised eyebrows, with rapid increases in companies like Nvidia and Palantir, prompting caution.
• 📈 While overall indexes are trading at above-average valuations, a value investor's approach involves finding attractive valuations in overlooked sectors.

Investing in AI and Growth Sectors

• 🚀 Investors can benefit from the AI trend by investing in infrastructure companies supporting data center build-outs and energy providers.
• 🛢️ Exposure to AI growth can also be found through commodities like copper, often accessed via royalty companies.
• 🏠 Sectors like insurance are also attractive, with companies showing consistent growth and profitable operations, often trading at reasonable valuations.
• 🤖 Companies like Amazon and Service Now are highlighted for their participation in automation and AI integration, offering sane valuations.
• 💡 Software companies like Roer Technologies and Tyler, despite consistent growth, have been impacted by AI fears, presenting potential contrarian opportunities.
• ⚛️ Uranium and nuclear energy are seen as sectors with significant tailwinds due to the increasing need for energy, including for AI applications.

US Economic Outlook and Monetary Policy

• 🇺🇸 The US economy is viewed as the strongest globally, with potential for 4-5% GDP growth driven by tax cuts, deregulation, and capital inflow.
• 📉 Despite significant national debt, policies under the Trump administration are expected to foster economic growth, contrasting with slower growth in other regions.
• 🏦 A dovish Federal Reserve is anticipated, with potential rate cuts to aid economic growth and manage debt rollover costs.
• 📈 While lower rates and stimulus might cause short-term inflation, the long-term strategy focuses on unleashing productive capacity and efficiency to control inflation.

Gold, Silver, and Commodity Strategy

• 🥇 Gold and silver are considered long-term protection rather than short-term trades, with fundamental drivers like debt, deficits, and de-globalization remaining strong.
• 💰 A significant allocation to precious metals (25% or more) is recommended, as the market lacks the capacity to absorb large inflows without substantial price increases.
• 🛢️ The portfolio includes a mix of royalties (70%), miners (20%), and physical metals (10%), with a focus on quality and well-managed companies.
• 📈 Commodities overall are expected to perform well, with Sprott Inc. highlighted as a way to gain diversified exposure through its commodity funds.
• ⛽ Oil and gas are seen as undervalued with critical importance, and an increased weighting is considered despite current low prices.

Canadian Economic Challenges

• 🇨🇦 The Canadian economy is facing stagnation, with near-zero GDP growth and high unemployment rates, particularly in Ontario and Toronto.
• 📉 Government policies are seen as actively chasing capital away, stifling private sector growth, especially in the resource and energy sectors.
• 🏦 The Canadian banking sector, despite the weak economy, has outperformed due to its oligopolistic structure and international operations, but faces challenges ahead.
• 📉 Concerns exist about the Canadian banks' ability to grow in a stagnant economy, with potential difficulties in expanding US operations.
• 📉 A brain drain of talent to the US and a lack of investment in wealth-producing sectors are significant structural issues for Canada.
• ⚠️ The current economic direction in Canada is described as leading towards negative growth and a decline in living standards, potentially resembling Venezuela if policies are not reversed.