Speaking to ET Now, Freeman said recent market gains reflect strong investor sentiment, but underlying volatility remains elevated after a year marked by sharp currency moves, rising precious metals, and falling interest rates. “There has been significant upheaval across asset classes—from a weaker dollar to higher oil prices and record highs in gold and silver—setting up uncertainty as we enter the new year,” he said.
Freeman noted that the US Federal Reserve has already delivered a cumulative 75 basis points of rate cuts in 2025 and may pause further easing unless employment data weakens meaningfully. “If job growth slows, there could be room for additional rate reductions, which would continue to support asset prices,” he added.
AI biggest near-term market risk
However, Freeman flagged artificial intelligence as the biggest near-term market risk. While the rally has broadened beyond the so-called “Magnificent Seven” stocks, he cautioned that AI-driven valuations remain vulnerable. “A surprise slowdown in AI spending or earnings could have ripple effects. Hardware companies are dependent on AI firms for revenue, and the cross-credit and ownership exposure could amplify stress if projections fall short,” he said.
Gold’s continued rise, according to Freeman, reflects both heightened risk perception and abundant global liquidity. “What is unusual is the sheer amount of liquidity. Money is flowing into equities, bonds have delivered strong returns as rates fell, and yet gold—which offers no yield—continues to attract capital,” he observed.
Private credit and corporate debt markets to feel pressure
Freeman warned that the real pressure point for 2026 may emerge in private credit and corporate debt markets. He pointed to weakening underwriting standards and a large volume of debt maturing over the next year. “There is a significant wall of debt coming due in 2026. We expect more companies to seek restructuring, with lenders forced to renegotiate terms. That is where investors may see negative surprises,” he said.
While public markets remain supported by liquidity and rate expectations, Freeman believes credit stress and any disruption to AI-led growth could test market resilience in the coming year.