LIVE MARKETS-Soft landing or fiscal cliff?

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SOFT LANDING OR FISCAL CLIFF?

U.S. equities stayed strong in 2025, with upbeat earnings driven by AI investment, low risk perception and lower rates supporting markets. Yet the U.S. Federal deficit remains outsized despite strong growth, raising some concerns of complacency.

"There’s a fine line between confidence and hubris," says First Eagle's head of global value Matt McLennan in a note —together with deputies Julien Albertini and Christian Heck and senior research advisor Kimball Brooker.

The Fed cut rates three times late in the year, reinforcing optimism as inflation cooled and the labour market softened — fuelling hopes of a soft landing.

But the team warns that full valuations and low risk perception leave markets vulnerable.

This backdrop helps explain why gold and Treasuries have decoupled – with gold increasingly responding to concerns around policy and credibility.

"Gold prices appear to be acknowledging the double-bind facing U.S. policymakers: Do nothing to address the deficit and increase the risk of inflation, or take action to curb deficit spending and increase the risk of recession," they say.

"More recent rallies in the prices of other precious metals like silver and platinum appear to reflect the same policy conundrum."

(Joice Alves)

EARLIER ON LIVE MARKETS:

CONCERN BREWING OVER A WEAPONISED DOLLAR CLICK HERE

PANMURE LIBERUM EXPECTS THE MUSIC TO KEEP PLAYING CLICK HERE

MIXED START FOR EUROPE, STOXX 600 INCHES UP TO ANOTHER RECORD CLICK HERE

EUROPE BEFORE THE BELL: FUTURES IN THE GREEN CLICK HERE

STOCKS KEEP CALM, CARRY ON RECORD RUN CLICK HERE