FAFO "Buy American" strategy returns, 2026 outlook analysis on gold and US stocks trends

Entering early 2026, the main trend in the global financial markets is gradually becoming clearer, with the “FAFO (Buy American)” strategy once again leading asset allocation directions. Overall, the US dollar and major stock indices perform relatively steadily, while cryptocurrencies experience a phased correction, reflecting a risk appetite shift from high-volatility assets to traditional defensive and core market assets.

Since the first week of 2026, the “Buy American” narrative has clearly gained momentum, with the US dollar index strengthening and the US stock market stabilizing in tandem. Meanwhile, the German DAX index performed particularly well, driven mainly by increased military spending expectations and defensive stocks. Rheinmetall’s stock price has already risen over 20% at the beginning of 2026, and nearly 150% for the entire 2025, becoming a representative target in the European defense sector.

From a geopolitical perspective, the US recently escalated tensions with Venezuela, taking actions such as asset seizures, further reinforcing the defensive asset allocation logic. Against this backdrop, US defense companies performed strongly, with Lockheed Martin rising 4.5% in a single day last Friday. Overall, defensive stocks, energy stocks, and related industrial sectors may remain the core focus of capital in the short term.

Meanwhile, demand for safe-haven assets has rebounded somewhat. Gold, silver, Swiss franc, and Japanese yen received some support. Although arbitrage trading still somewhat suppresses gains, in an environment where the 30-year US Treasury yield fluctuates at high levels, these assets still hold allocation value. This combination is also summarized by the market as the “FAFO narrative,” meaning that Trump’s interventions in energy markets and geopolitical arrangements are reshaping global risk pricing.

On the macroeconomic front, last week’s US non-farm payrolls increased by only 50,000, below the market expectation of 70,000. In the short term, this data exerted some pressure on the dollar, but the dollar subsequently stabilized and closed higher, while gold prices also recovered after volatility. Market consensus generally expects the policy interest rate to remain unchanged at the January and March FOMC meetings. The FEDwatch tool shows that the probability of holding rates steady increased further after the non-farm payroll data release.

Looking ahead to this week, US CPI data will be a key variable. Although inflation is expected to slightly decline after weak employment data, this expectation has been fully priced in, and with major global central banks’ policies stabilizing, there is limited room for rate cuts.

From a technical perspective, XAU/USD is in a seasonally favorable window, with the first two weeks of January historically having a higher probability of gains. Currently, gold prices are supported by the 20-day moving average, with healthy momentum and no signs of overbought conditions. There is still room for continuation before the CPI release.

Regarding the US stock market, the S&P 500 index lags slightly behind the DAX, but with defensive, energy, and financial sectors leading, the trend is expected to improve. As institutions like JPMorgan, Bank of America, Wells Fargo, and BlackRock release earnings reports, combined with inflation data impacts, US stocks may remain volatile in the short term, gradually choosing a direction.

Overall, the market structure at the beginning of 2026 leans more toward defensive and core asset allocation. The “FAFO” strategy remains an important clue for understanding current gold trends, the divergence in US stock structures, and macro capital flows.