How to allocate assets in a high-interest-rate era? An analysis of the returns comparison between U.S. bonds, gold, Bitcoin, and U.S. stocks

In December 2025, the Federal Reserve's Federal Open Market Committee (FOMC) cut interest rates for the third consecutive time by 25 basis points, bringing the federal funds rate target range down to 3.50% to 3.75%, in line with market expectations. However, the subsequent dot plot released a key signal: the median projections for the federal funds rate in 2026 and 2027 are 3.4% and 3.1%, respectively, implying only two rate cuts over the next two years, totaling about 50 basis points. Fed Chair Powell emphasized at least five times during the post-meeting press conference that the committee does not need to rush to further adjust policy rates.

For investors, this signals a clear window—interest rates at 3.50%-3.75% may become the new "normal" for quite some time. Within this rate environment, how are the pricing logic and historical performance of the four core assets—U.S. Treasuries, gold, Bitcoin, and U.S. stocks—shaping up? What should be the sequence of asset allocation under a high-interest-rate environment?

Structural Features of the Current Interest Rate Environment

The 3.50%-3.75% rate range is not just a simple midpoint but a significant policy milestone. From an absolute level, this rate remains in a relatively high range since the 2008 financial crisis; from a directional perspective, the start of a rate-cutting cycle confirms a policy turning point, but the slow pace implied by the dot plot suggests the market’s previous expectation of "rapid easing" has been revised.

More notably, the bond market is pricing in a more hawkish path than the Fed’s statements suggest. In May 2026, U.S. Treasuries experienced a rare acceleration in selling during Asian trading hours, with the 30-year yield briefly reaching 5.16%, the highest since October 2023; yields on 10-year and 2-year Treasuries also hit their highest levels since February 2025. As of early June 2026, the 10-year yield surpassed 4.5%, and the 2-year yield rose to 4.16%, reaching one-year highs. The volatility in the long-bond market reflects growing concerns over fiscal sustainability, creating a feedback loop where "debt worries push yields higher, and rising yields further worsen debt dynamics."

Against this complex backdrop, the driving logic and sensitivities of different assets vary significantly. Understanding these differences is the starting point for asset allocation in a high-interest-rate environment.

U.S. Treasuries: From "Risk-Free Benchmark" to "Amplifier of Rate Volatility"

Traditionally, U.S. Treasuries have served as the "risk-free return benchmark" in asset allocation. But with structural changes in the interest rate environment, Treasuries have shifted from the safest assets to instruments with significantly increased volatility.

Reviewing 2025, the 10-year Treasury yield peaked at 4.8% early in the year before falling sharply, briefly dipping to a low of 3.86% during trade tensions, then oscillating within that range. Although volatility narrowed compared to the sharp swings of 2024, for bond investors aiming to hold to maturity, volatility itself entails opportunity costs of early exit.

Within the 3.50%-3.75% rate range, short-term government bonds offer relatively high certainty in yields, forming a core option for cash management-oriented allocations. However, market-implied inflation expectations still carry upside risks—while the 10-year inflation outlook remains relatively moderate below 2.5%, the May sell-off was primarily driven by a significant upward revision in inflation expectations. If inflation remains persistently higher than expected, the Fed may be forced to keep rates high for longer, supporting reinvestment yields on short-term bonds, but putting downward pressure on long-bond prices cannot be ignored.

Gold: Paradigm Shift in Pricing Logic

In 2025, gold delivered an impressive performance. London spot gold prices rose from $2,610.85 per ounce at the end of 2024 to surpass $4,500 per ounce at the peak in 2025, an increase of over 70%. Many institutions are bullish on 2026: JPMorgan raised its Q4 2026 target to $5,055/oz, and Bank of America even predicts gold could reach $6,000.

Traditionally, gold has a classic negative correlation with real yields on U.S. Treasuries—rising real yields increase the opportunity cost of holding gold, exerting downward pressure on its price. But in the current cycle, this framework has significantly broken down. Since 2022, despite aggressive Fed rate hikes and rising real yields, gold prices have not declined but instead continued to strengthen, reaching record highs even amid high real yields in 2024 and 2025.

This divergence is driven primarily by a structural increase in global central bank gold purchases. From 2022 to 2024, central banks worldwide averaged net gold purchases of 1,073 tons annually, accounting for about 23% of global gold demand. The inherent pressure on the dollar’s credit system—exacerbated by twin deficits—has prompted central banks to accelerate diversification of their reserves, elevating gold’s strategic role beyond short-term interest rate sensitivity and establishing it as a new pricing anchor.

In the 3.50%-3.75% rate environment, gold’s allocation logic also diverges: for short-term trading, marginal changes in real yields remain important price influences; for medium- to long-term allocation, central bank gold purchases as a structural force provide higher certainty. In 2025, the drivers behind gold’s price increase include: Fed rate cuts and rate declines (~30%), central bank gold purchases (~25%), geopolitical risks and safe-haven demand (~20%), dollar weakness and credit concerns (~15%). This distribution indicates that gold is no longer purely a "rate-sensitive asset."

Bitcoin: Liquidity Dynamics and the Halving Cycle

In 2025, Bitcoin completed a typical halving cycle. After the April 2024 halving (reducing mining rewards from 6.25 BTC to 3.125 BTC), the price approached a peak of about $126k in October 2025, then declined over 30%, and by June 2026 had retraced more than 50% from its all-time high.

This pattern closely matches previous halving cycles in shape, but the magnitude differs—2025’s rally was far less exuberant than earlier bull runs, and the decline after the peak was relatively mild, with a converging amplitude of cyclical fluctuations. Nick Ruck of LVRG Research notes that signs of the halving cycle breaking down have emerged in 2025, as continuous inflows from ETFs and institutional investors have mitigated the sharp declines typically seen after peaks in prior cycles.

In a high-interest-rate environment, Bitcoin faces macro pressures mainly related to liquidity. When rates stay in the 3.50%-3.75% range and the pace of further rate cuts is slower than expected, risk assets like cryptocurrencies will continue to face valuation pressures. In June 2026, stronger-than-expected U.S. employment data prompted a reassessment of prolonged high rates, causing Bitcoin to retreat to the $60k–$62k range.

However, on the structural side, demand fundamentals support Bitcoin. The approval of spot ETFs and ongoing capital inflows are shifting Bitcoin’s demand from "retail speculation" toward "institutional allocation." Over the long term, if Bitcoin evolves into a "core macro asset," its correlation with traditional financial cycles may deepen, and volatility could gradually decrease as institutional participation increases.

U.S. Stocks: Earnings Growth vs. Valuation Pressure

In 2025, the U.S. stock market performed strongly. The Nasdaq rose 30.12% year-to-date, the S&P 500 increased 24.56%, and the Dow Jones gained 14.87%. Goldman Sachs projects that EPS for the S&P 500 will grow 7% in 2025 and 6% in 2026, contributing about 55% of the total return in 2025. By 2026, the S&P 500’s EPS is expected to reach $338, up roughly 25% from 2025, a pace usually seen only during economic rebounds.

Many institutions are optimistic about 2026. UBS CIO expects the S&P 500 to reach 6,800 by June 2026, with a bullish scenario of 7,500. Another forecast suggests about 10% upside in 2026, with a high of 7,500. JPMorgan predicts corporate profit growth of 8%-13% in 2026, with a year-end target range of 7,000–7,400 for the S&P 500.

But concerns are also clear. The current forward P/E ratio of the S&P 500 exceeds 23, while in 2022 it was below 16. The Shiller CAPE reached 40.11 in October 2025, about 132% above the long-term average of 17.28 since 1871, approaching the 44.19 peak during the dot-com bubble. Valuations are at historically high levels, meaning any reversal in interest rate expectations could trigger valuation contractions.

In a high-interest-rate environment, the game between "profit growth" and "valuation compression" will determine actual returns. If rate cuts are slow but corporate earnings continue to beat expectations, stocks may still deliver positive returns; if inflation rebounds and rate expectations turn hawkish, overvalued sectors will face increased pressure.

Historical Performance Ranking of the Four Assets: Understanding Allocation Logic from a Long-Cycle Perspective

Looking at the decade from 2015 to 2025, the cumulative returns of the four assets show a clear hierarchy. Bitcoin leads with approximately 402x growth, followed by the S&P 500 at about 2.97x, gold at roughly 3.08x, and U.S. Treasuries at about 1.26x. It’s important to note that Bitcoin’s extraordinary returns come with extreme volatility, and the tenfold difference in scale means that risk-reward characteristics are not comparable on a simple absolute basis.

Focusing on the "high-interest-rate" window, the ranking logic shifts. During periods of rising or sustained high rates, asset performance generally follows this order: if corporate earnings can outpace valuation compression, stocks can generate positive returns; gold, supported by central bank purchases and structural demand, shows resilience even in high-rate cycles; short-term Treasuries offer certainty in yields, while long-term Treasuries are vulnerable to rate fluctuations; Bitcoin is most sensitive to liquidity expectations and tends to underperform in tightening or high-rate phases.

Gate Stock Trading: Entering the Multi-Asset Allocation Era for Crypto Platforms

Ultimately, asset allocation discussions must translate into actionable strategies. For crypto market participants, traditional financial assets have long faced barriers such as account fragmentation, cross-platform fund transfers, and fiat currency exchange frictions. On June 1, 2026, Gate launched real stock trading services, supporting over 10,000 U.S. stocks and ETFs. Crypto users can now directly participate in U.S. equity markets using USDT without switching platforms. This marks Gate’s pioneering move to integrate cryptocurrencies, U.S. stocks, and ETFs into a unified account system, stepping into a multi-asset allocation platform.

From a trading experience perspective, this model’s core difference is that buying stocks means owning the assets directly—entitling holders to dividends, stock splits, and other shareholder rights—without involving any funding rates, swaps, or overnight fees, nor the liquidity discounts associated with tokenized assets during extreme market conditions.

This allows users within a single Gate account to hold BTC as digital gold, while also using USDT to buy U.S. Treasury ETFs and core stocks, forming a "crypto + traditional finance" multi-asset portfolio. In the context of the 3.50%-3.75% rate lock-in, this integrated account capability enables investors to flexibly adjust asset weights based on macroeconomic outlooks, balancing between different scenarios and dynamically rebalancing.

Conclusion

The 3.50%-3.75% rate range is not the end but a new beginning. The rate cut cycle confirms a policy shift, but the signals of "slow rate reductions" from the dot plot suggest rates will remain in a historically high-to-mid range for an extended period. In this environment, U.S. Treasuries, gold, Bitcoin, and stocks each exhibit distinct driving logic and risk-return profiles. In the short term, short-term Treasuries and leading corporate earnings remain relatively advantageous; structurally, central bank gold purchases and institutionalization of Bitcoin are reshaping their long-term value propositions. There is no one-size-fits-all answer for allocation, but understanding each asset’s pricing logic in the current rate environment is the starting point for all decisions.

Meanwhile, the integration of crypto platforms with traditional assets is accelerating. Gate’s real stock trading provides a direct, low-friction pathway for crypto users to participate in U.S. equities, enabling the construction of diversified multi-asset portfolios within a single account. In a market characterized by interest rate uncertainty and asset divergence, the unified account and flexible allocation are themselves competitive advantages.