Stocks, Bonds, and Commodities: What's Driving Each Right Now

A simple cross-asset overview for non-experts

By Rajesh Sharma

If you're trying to understand what's happening in financial markets, you're probably hearing about three main categories: stocks, bonds, and commodities. Each moves for different reasons, and right now, they're telling three distinct stories about where the economy is headed.

Stocks: The AI Obsession Continues

The stock market's story in 2026 is simple: artificial intelligence is everything. Fidelity International calls AI "the defining theme for equity markets" this year, and the numbers back that up. The S&P 500 posted gains over 16% in 2025, marking three consecutive years of double-digit returns driven primarily by technology companies investing heavily in AI infrastructure.

Every Wall Street forecaster tracked by Bloomberg predicts stocks will rally for a fourth consecutive year, with consensus expectations around 9% gains. That's optimistic but not without concerns. AI-related stocks grew their earnings by 30% per year from 2023 to 2025, compared to just 3% for non-AI companies. This concentration creates riskthe market increasingly depends on a narrow group of technology giants to deliver results.

Gold and silver advanced to open 2026, building on their best annual performances since 1979. Precious metals surged more than 40% in 2025, driven by central bank purchases, geopolitical uncertainty, and investors seeking alternatives to traditional assets. Goldman Sachs projects gold climbing to $4,900 per ounce by December 2026, supported by Federal Reserve rate cuts and continued demand from central banks.

Recent volatility suggests growing nervousness. Big selloffs and quick reversals have characterized markets for the past 18 months, a trend expected to continue. Investors are caught between fear of missing the AI rally and concern it's a bubble. Software stocks particularly came under pressure in early February as investors questioned whether AI might disrupt their business models rather than enhance them.

Bonds: Rangebound and Income-Focused

The bond market tells a more subdued story. After a historically strong 2025 when the Bloomberg U.S. Aggregate Bond Index returned 7.1%, one of its best years since 2000 expectations for 2026 are more modest. The 10-year Treasury yield currently sits around 4.2%, and most forecasters expect it to trade between 3.75% and 4.25% throughout the year.

The Federal Reserve is expected to cut interest rates cautiously, bringing the federal funds rate down to somewhere between 3.0% and 3.5% over the next year. That means two to three additional quarter-point cuts, driven primarily by concerns about a weakening labor market even as inflation remains above the Fed's 2% target.

This creates a challenging environment for bonds. When rates fall slowly while inflation stays elevated, bond prices face modest downward pressure, meaning total returns will likely come primarily from the income bonds generate rather than price appreciation. Starting yields around 4.3% for investment-grade bonds remain historically attractive, however, particularly for investors tired of cash holdings that will see yields decline as the Fed cuts rates.

The yield curve has normalized after being inverted for nearly two years. The 10-year Treasury now yields about 0.70% more than the 2-year Treasury, close to its historical average. This steepening reflects short-term rates falling while longer-term rates hold steady due to persistent inflation concerns and fiscal pressures from elevated government borrowing.

Commodities: Diverging Fortunes

The commodity market is splitting into winners and losers. Precious metals gold, silver, platinum, and palladium enjoyed a historic run in 2025, with the precious metals subsector rising 64% according to the Bloomberg Commodity Index.

Industrial metals like copper and aluminum are expected to take the baton in 2026. Copper reached an all-time high near $12,000 per metric ton in late 2025, and banks project the biggest copper supply deficit in 22 years for 2026. Demand from AI data centers, electric vehicles, and renewable energy infrastructure is colliding with constrained mine supply. Copper remains Goldman Sachs' "favorite" industrial metal for the long run.

Oil tells the opposite story. Brent crude is projected to average around $60 per barrel in 2026, down from $68 in 2025. The culprit: oversupply. The U.S. has dramatically increased production while global demand remains sluggish, expanding by less than one million barrels per day. The oil market faces a sizable surplus in 2026.

What It All Means

These three asset classes are being driven by fundamentally different forces right now. 

Stocks are riding AI enthusiasm but facing concentration risk. Bonds offer decent income but limited upside. Commodities are splitting between metals benefiting from structural demand and energy facing oversupply.

For investors, this divergence suggests opportunities for balance using bonds for stability and income, maintaining stock exposure for growth despite volatility, and considering selective commodity exposure where supply-demand fundamentals look favorable.