Your Highnesses, Excellencies, ladies and gentlemen, friends, it is an incredible honor and a real pleasure for me to be here. I would like to thank Abdul Mosen for inviting me and I would like to thank our colleagues at the family office for organizing such a special event in a really unique and breathtaking place. My objective with you is to have a conversation. So the plan is I will share with you some thoughts for 15 minutes and then Maya will come up and we will have a dialogue and we will also have an opportunity for questions from the audience. I hope to leave you with four points. One, that 2025 was a paradox. We were hit by all sorts of news. If you take the image of the sea, we seem to go from one storm to another. As His Highness said, geopolitics changed, the world changed. And yet, if you look at the outcomes, economic and market, they were good. Quite a paradox. What does that tell us about this year? The second thing I want to share with you is what new issues have already emerged that will play out during the year. Third, we will summarize all this to look at the distribution of outcomes for this year and next. And finally, since we are gathered here by the family office, we will talk about investment implications.
So, one of the hardest things to reconcile in 2025 was the journey and the destination. A very bumpy journey. People felt like they were trying to drink from a fire hose of news every single day. And the news had one label to it, geoeconomics. What is geoeconomics? It is this notion that economic policy, economic outcomes is determined less by economic logic and more by geopolitics, national security and domestic politics. So we had a fire hose of geoeconomic news and in the process we dismantled two paradigms, two anchors. So think again the global economy in the sea. It lost both its anchors in the middle of a storm. The one anchor was globalization, the notion that bringing countries together through trade, through investment, through people makes better outcomes. And the other was what was called the Washington consensus, the policies that were advocated by the United States to others in order to promote prosperity, free trade, respect of institutions, fiscal discipline.
So, it's not a surprise that the following issues were: were we going to have a global trade war or not? How bad would the inflation effects of US tariffs be? How will China navigate its collapsing trade with the US? How will the US consumer, the engine of growth, maintain momentum with such high prices? What happens when you decouple GDP growth from employment? And finally, will the bond market lose patience? All these questions were asked and yet despite all these uncertainties, look at the result. We had the IMF updates last week. Global growth was a very respectable 3.3%. US growth accelerated to 2.4%. The Euro zone, which people thought would go into recession, 1.4% and emerging markets, which we'll talk about later today with Dr. Basat and Lord O'Neal, 4.4%. If you look at the growth numbers it was a good year. Look at the market numbers. If you are a global equity investor, 21% return. If you had ventured into risky markets, emerging markets, 34% returns. In a very unusual, you did well on your risky assets and you did well on your risk-free asset. We all know what gold has done, what silver has done. Investors made money virtually everywhere. The global economy had good growth. And yet we had all these questions.
There are two narratives that explain why this happened. One is the market narrative. It's all noise. It all is noise. You don't pay attention to it. Why? One phrase was TACO: Trump Always Chickens Out. So whenever the market sells off, you simply buy. Another was the behavior that the markets have come to adopt which is buy the dip because markets just keep on going up and every time the market sold off people came in. That's the market interpretation. The economic interpretation has to do with resilience. You will hear from Nouriel Roubini later today and he came out with the notion that AI beats everything. That because we had an AI engine that meant that the economy was resilient to shocks. There's another view that says you just wait. You remember Brexit? Remember when the United Kingdom exited from its main trading relationship? It took time for the effects to be felt. My explanation is very simple. Again, the image of the sea. There were crosscurrents, there were winds, there were storms, but there were two engines taking us through this. One engine, AI. Massive amount of investments because the markets threw money at anything that had an AI label on it. And to China, do you remember I told you that shipment to the US collapsed? They collapsed by a fifth, by 20%. And yet China grew its exports and generated a trade surplus of 1.2 trillion. Those two engines took us through all these uncertainties.
The problem is that these uncertainties are still with us. Protectionism is still with us. Just this year, we've had threats of tariffs of 100% on Canada, on South Korea. There's a question mark as to the inflation effects of tariffs. I sit on a corporate board. Our immediate decision was we don't know whether tariffs will last so let's not pass the price to the consumer. Why upset your consumers if you don't know what the Supreme Court is going to decide? So the story isn't finished but we have new things. Affordability has become the most important word in the US and Europe. The average person feels they can no longer afford their standard of living. And because of that we are seeing policies aimed at improving affordability. We have seen the US government in particular enter different markets including the mortgage markets in order to make things more affordable. This will increase because we have elections in November. China was able to redirect a lot of its exports to Europe. But Europe is having indigestion now. Europe can no longer absorb all these exports. You will see protectionism between Europe and China. The bond market was very patient. That patience is going to be tested because of all of the demands on the bond market. High government deficits in advanced economies, enormous AI needs, household, corporates. Remember, in the last three and a half years, the bond market has already attacked three of the seven G7 countries. The UK in 2022, France in 2024, and Japan in 2025. We are starting to see many currency wars. The US complaining that the Japanese yen is too weak. Complaining that the Korean currency is too weak. And then finally and one of the biggest questions is AI. Will the hyperscalers be able to monetize the enormous investments that has been made and will the adoption of AI, not those working on AI but those working with AI, will that happen at the speed and with the uniformity that's required to unleash the productivity miracle.
So whatever you do and you put all this in and you say what does the distribution of outcome looks like? What am I to expect? The central scenario, the baseline which we would hope would be 80-90% probability is 50% probability. And that baseline is a continuation of last year. Then the distribution has two extremes at 25% each. The good 25% that we get AI adoption, that the bond market is patient and you unleash higher growth, higher productivity that allows us to navigate high debt, protectionism, attack on central banks. That's the 25% positive tail. And the 25% negative tail is we get stagflation. Growth slows down, inflation grows. Now let me tell you that this is the worst distribution to have. Your central scenario is only 50%. And then you look left, you look right, it is the same probability. That can be paralyzing. It can absolutely paralyze you. So the important thing is what should you conclude and how do you embrace the implication of what's called the multimodal distribution. The first one is volatility. Get ready for volatility. And the problem with volatility, it can make you do the wrong thing at the wrong time. So always ask yourself, am I well equipped to navigate volatility? Am I resilient enough? Are my liquidity needs covered? The second is dispersion. We're going to see an accelerated divergence between countries, between sectors, between companies, between households. There will be more of the so-called K-shaped economy. And the third is fragmentation. More and more of the global systems for the reasons cited by His Royal Highness will start fragmenting and you will be seeing the rewiring at the margin of trade, of investment. Volatility, dispersion, fragmentation. These are your themes for the year ahead.
So, how does it play out in the investment world? If you think about it, investors are paid for different things. We normally have three streams of returns. We have what we call the secular stream. You get paid because a long-term bet works out over time. AI, electricity back in the days, the convergence of emerging markets, the coming together of the European Union. These are secular themes and they pay you over time. That was very powerful last year. It will not be that powerful this year. The second is the structural bucket. You are being paid because you are completing markets, because you're addressing market failures. You're completing the mortgage market. Private credit was an example of a structural trade. Private equity was an example. Today, the most promising is private credit in emerging markets where advanced countries were 15 years ago. That theme of structural stays relevant but you need to look beyond the advanced economies. And then the third theme is opportunistic. Taking advantage of people who need liquidity, taking advantage of market overshoots. That is going to be a very important theme. So there will be a shift in return streams from secular which was very strong last year. It will be less strong this year to structural and opportunistic. That will mean that your investment portfolio will become more barbelled with high conviction returns over here. Returns that can take you through the storm and many opportunistic opportunities here.
So the last thing I want to say is something that we don't normally talk about which is how do you have the execution to allow for this? Abdul Rahman reminded me that the one lesson from history is if you don't know where you're going, you need three characteristics. You need resilience which means if I make a mistake it's a fully recoverable mistake that comes from financial resilience and human resilience. The second thing you need is optionality and an open mindset. Think differently because the world is changing. And third you need agility. The ability to move quickly when the opportunities arise. You will get that if you take the three things that I will conclude with: high certainty of execution. Ask yourself what would I do in different scenarios so that when that scenario happens you have a high certainty of execution. Secondly, take seriously not just the promise of the AI transformation but the complexity of the AI transformation. Satya Nadella, the CEO of Microsoft, summarizes what has happened in the last three years very simply. He said just over three years ago when we all heard about ChatGPT, AI was simple. You ask it a question it gives you an answer. Two years ago AI evolved and it became you give it a task. Write me a document, summarize this document, write me an email and it will deliver on the task. Today AI is your intellectual companion. It is having a 100 plus PhDs with enormous knowledge. Yes, they make mistakes but they are much more knowledgeable than any other resource you had available to you. And if you know how to use it, which is a big if, it can make life very different for you in a positive way. So the complexity of working with AI is something that has to be taken really seriously. And the final thing, and this is where I'm going to end and have a conversation with Maya, is the importance of governance. We often forget the importance of governance. In a world like this, you need governments that allow you to shift between return streams, to be willing to ask the uncomfortable question and most importantly to be open to the fact that the world is changing in a way that we don't know ultimately what the destination looks like. Thank you very much.
So a year ago when I was on CNBC, I was asked where do you see gold prices in 2025? And I said we may reach 5,000. And people laughed. And I was wrong because we didn't reach 5,000 in 2025. We've reached 5,000 in January of 2026. Why? There are three very powerful forces. The first one is central banks, Asian central banks. You cannot find another currency to replace the dollar. So if you want to reduce slowly your exposure to the dollar, you buy lots of other things. One thing that central banks are doing right now, especially China, is buying gold every month, programmatic. Now the minute you put in a central bank with very deep pockets buying an asset and if you have confidence that they will continue buying that asset, you know that they are non-commercial buyers. They are not price sensitive. They will buy at 3,000. They will buy at 4,000, they will buy at 5,000. That attracts institutional investors. And what we've seen is institutional investors adopt more gold as a central asset. So the weight of gold has gone from zero in most model portfolios to somewhere between 5 and 10%. The minute speculators say, 'Wait a minute, the central banks are buyers, the institutional investors are buyers, I will front-run both.' And then you turbocharge the whole thing. But you also make it more volatile. This year you will see a lot more volatility because a lot of speculators are going to say, 'Alhamdulillah, now let me just book my profits and then other buyers will come in.' It wouldn't surprise me if we see 6,000, but it's going to be a much more volatile journey to that level.
