Aswath Damodaran argues 2025 markets reflected a US institutional trust deficit

Aswath Damodaran argues 2025 markets reflected a US institutional trust deficit

Aswath Damodaran published this analysis on January 28, 2026, arguing that a loss of trust in US institutions best explains the different ways financial markets responded to major US events in 2025. He expected the bond market to show the effects of that loss most clearly, but reports that the ten-year Treasury rate fell by 39 basis points and expected inflation ended the year lower. He contrasts that muted bond-market response with a weaker dollar and sharp rises in gold and silver, which he says indicate that some investors were more concerned about trust than others. Bitcoin, in his account, did not behave like gold: its closer relationship to US equities suggested it drew risk seekers rather than risk-averse investors. Damodaran’s point is not that investors were unconcerned. He concludes that markets sent conflicting signals: bonds and stocks largely underplayed the trust issue, while currency and precious-metals markets registered concern. He also warns that if the Federal Reserve is viewed as an extension of government, belief in its ability to contain inflation could be put at risk. The article does not establish how much trust concerns, rather than other forces, drove each market’s movements.

Publication: f835c8df-668c-b399-2fa5-07b7d9dcc52d

attribution — pass: This is a single first-person blog analysis by Aswath Damodaran, and the reading attributes its arguments to him throughout. The trailing list of Data Update posts is site navigation, not a sign that the evidence is merely an index. The piece has no explicit AI connection, which bears on editorial fit rather than attribution accuracy.

I will argue that a loss of trust in institutions (governments, central banks, regulatory authorities) was the thread that best explains their performance.

summary — pass: The summary faithfully follows the post. Bonds were expected to show the loss of trust most clearly, yet the ten-year rate fell and expected inflation ended lower. It covers the dollar's weakness, the gold and silver surge, bitcoin's link to equities, the warning about Fed independence, and the conclusion that markets sent mixed signals. Basis point is defined in the term library, and the other terms are explained or broadly familiar. The question follows from the source's own framing.

It seems like the market is pulling in different directions on the trust question

date — pass: The instant 2026-01-28T11:45-05:00 falls on January 28, 2026 in UTC, matching the stated date. The page was modified on 2026-10-23, and later Data Update entries (4–8) in the trailing list may be later additions. The reading does not use or rely on them. The cited passages are plainly part of the original body text. There is no hindsight framing, and the retrieval date is disclosed.

support — pass: Each claim is source-stated and supported by an exact excerpt. The rises in gold and silver are stated in the text (65% and 148%). The limitation that the article does not establish causal weights is an appropriate caveat. The reading makes no unsupported inferences about benefits or costs. Source-grounding does not independently verify the market figures.

Gold had one of its best years ever, rising 65% during the year, and silver, the other widely held precious metal, had an even bigger year, rising 148% during the year

media — pass: No media was selected, and no verified candidates were supplied. The source media list is empty and unchecked, so omitting media is appropriate.