In this Market Update, Jack Ablin, Chief Investment Strategist, and Mike Silverman, Chief Investment Officer, joined host Doug Regan to discuss whether the “Sell America” narrative reflects a genuine flight from U.S. assets or a dollar-hedging trade, the drivers behind gold’s recent rally, and Cresset’s baseline outlook for 2026, as discussed during the webinar. They framed the conversation around policy uncertainty, currency dynamics, affordability pressures, and the potential for near-term fiscal and monetary stimulus.
Sell America, or hedge the dollar?
Global flows into U.S. bonds and equities have continued, but many foreign investors are explicitly hedging currency exposure. Jack and Mike noted that the dynamic appears less about “selling America” and more about concern over the dollar’s trajectory, with policy headlines and tariff risks amplifying that focus.
Dollar dynamics and policy risk:
Policy uncertainty is elevated relative to prior cycles and has contributed to dollar volatility. Trade policy developments, tariff-related legal challenges, and public commentary on currency weakness were discussed as near-term drivers that can influence sentiment even when capital continues to flow into U.S. assets.
Gold’s rally: momentum, central banks, and mining economics:
Gold has experienced a notable increase, driven partly by dollar movements, though a portion of the move was discussed as not fully explained by currency dynamics alone. Central bank buying—particularly potential demand from China—and large margins between current prices and mining costs were cited as factors that have supported gold demand. At the same time, replacement-cost economics and central-bank behavior were noted as sources of uncertainty when assessing the metal’s valuation.
Tariffs, refunds, and corporate implications:
The speakers reviewed the potential effects if tariff rulings are overturned and the possibility of refunds on previously collected tariffs. They noted these developments could affect corporate profits and alter trade dynamics, even if some form of trade protection remains in place through alternative statutory mechanisms.
Consumer split and affordability pressures:
A two-speed consumer environment persists. Higher-income households continue to support retail and discretionary spending, including travel, dining, and experiences, while lower- and middle-income households face rising housing and non-discretionary costs. Consumer confidence remains weak at recent lows, highlighting uneven demand across income cohorts.
Housing and affordability:
Housing affordability remains strained, with rents and mortgage costs identified as key sources of pressure. The presenters discussed potential policy approaches and the possibility of government or central-bank interventions, including balance-sheet measures, that could influence mortgage rates, while emphasizing associated trade-offs and inflation risks.
AI capex and the investment cycle:
Substantial capital spending tied to AI infrastructure was highlighted as a potential growth driver, with possible spillover effects for construction, employment, and productivity. These dynamics were discussed as factors that could influence the broader economic backdrop if investment activity continues to accelerate.
Valuations, breadth, and credit risk:
Markets were described as appearing expensive relative to historical measures, with leadership remaining narrow. Jack emphasized quality as a long-term focus, while acknowledging that cyclical periods could see high-yield or lower-quality segments outperform temporarily. They discussed a modest probability of a credit-driven slowdown, while also noting that a re-acceleration scenario was plausible if stimulus and monetary easing materialize.
Fiscal and monetary outlook for 2026:
Near-term fiscal impulses, including tax refund timing, along with a potentially more accommodative Federal Reserve stance under new leadership, were discussed as factors that could influence growth and liquidity in early 2026. The team stressed that outcomes remain policy-dependent and that easing could support markets while also increasing inflation risks later in the year.
Outlook:
Cresset’s base case, as discussed, is moderated growth supported by stimulus and investment, alongside a non-trivial—but not dominant—risk of credit tightening or economic slowdown. Portfolio implications discussed included maintaining an emphasis on quality while monitoring valuation sensitivity, currency-hedging considerations, and selective exposure to themes such as AI-related capital spending and private credit within the context of the evolving policy and earnings environment.
