Gold may gain another 10-15%, and silver could do even better as a more volatile proxy for gold, said Bhanu Baweja, chief strategist at UBS Investment Bank. In an interview with Himadri Buch, UK-based Baweja also spoke about slowing equity returns in 2026 and the resilience of the US dollar, among other topics. Edited excerpts:

What is your assessment of equities in 2026?

We will continue with decent returns, but more mediocre returns in 2026 than in 2025 and in 2027 we see a stalling in returns. We are not saying, we will see an exponential rise and then a collapse. We don't think there is a bubble. In fact, over the next 3 to 4 months, the markets are going to consolidate, and it's only from the fiscal expansion of March that you are going to start seeing another demand impulse come through into the US economy, and that gives you mediocre returns of about 8-10% in US equities. Next year, emerging market equities and European equities will underperform US equities modestly.

What about India? Has risk-reward turned favourable for almost 15 months of underperformance?
I don't believe it has as yet. Although the earnings prospects are looking a little better, there hasn't been enough of a correction in valuations yet. We also don't think the degree to which earnings expectations are high gives us any confidence, as market expectations of earnings are already quite high.

Also, the supply of equities in terms of new issuances is quite high. So, we think the risk-reward prospects for India in absolute terms are fine but they are not stellar. India lacks a strong relative case versus Asian peers as it does not benefit meaningfully from the AI trade and faces disruption risks in IT services. One of the things I am really worried about for many emerging markets, and India being one of them, is that China is gaining market share in these economies very quickly.

And, why is that?

So, if you are a global investor, many people think of the rupee as a consequence of the tariffs that the Trump administration has put in place. I believe that that's not true. I believe that the Trump administration's tariffs are actually secondary. We believe the rupee is actually a very uncompetitive currency, made even more uncompetitive by China's hyper competitiveness.

How are you reading the most recent 500% tariff threat by the US, which has hit the market?

Tariffs didn't impact markets and global trade in 2025 as the US saw a big increase in imports to front-run the tariffs and companies took the hit on their margins. If the tariffs stick, companies are likely to slowly pass them on to the consumer, leading to modestly higher inflation.