Economic Commentary

• The global economy appears set for moderate growth; despite tariffs, policy uncertainty, and geopolitical tension it will likely avoid Our outlook is for positive but slowing growth as AI capex and heavy fiscal spending continue, but moderate from last year.
• GDP: Analyst expectations for S. GDP growth cluster around 2%, which we think is a slightly high but reasonable expectation. For example, JP Morgan expects US real GDP growth of +1.8% in 2026, while Goldman Sachs forecasts +2.6% growth. Supports to the economy include AI capex, a resilient US consumer, and gradually easing financial conditions due to rate cuts and moderating inflationary pressure from rents.
• Labor Market: We expect the labor market to continue to slow In 2025, job creation in the U.S. slowed from 150k a month to 30k a month, with more weakness at year end. Yet, to keep unemployment steady, payroll gains only need to average 60k per month as labor supply growth slows due to demographics and immigration enforcement. Vanguard projects unemployment at 4.2% by end-2026, comparable to 2025.
• Inflation: We expect inflation to run closer to 3% than 2%, remaining somewhat “sticky.” JPMorgan expects core PCE inflation of 2.7% in 2026, with tariff pass-through continuing well into next year. They emphasize sticky inflation’s “roots” are rising wages plus continued services inflation.
• Europe: Analysts expect Euro area GDP growth of +1.2% in 2026 (near potential). They quantify tariff drag as –0.3pp on GDP in 2026, partially offset by fiscal tailwinds such as increased defense Unemployment is expected at about 6%. Inflationary pressures should be lower compared to the US.

• China: Economists expect growth about 5%; domestic demand remains weak but China has successfully pushed export growth. Disinflation/deflation risk remains central as the real estate bubble has deflated, taking consumer sentiment with it.
• Japan: We expect slow growth of one percent or less. We also expect more normalization of interest rate policy, i.e. higher rates than in the past decade.

(Source: Goldman Sachs, Vanguard, JP Morgan Outlooks)

Political / Policy Commentary

• Upon resuming power, the Trump administration moved quickly on three fronts: tariffs, the budget/taxes and deregulation. On taxes, the “OBBBA” resulted in net tax cuts, but skewed largely to higher income households with lower propensity to Tariffs caused significant disruption, but ultimately have resulted in significantly lower rates than feared. On the whole, significant deregulatory measures have largely been taken in financial (banks, crypto) and environmental issues, but the market still hopes for broader federal deregulation efforts to impact the economy. For example, measures to speed permitting and construction.
• The 2026 midterm elections loom as a major inflection point. With narrow Republican margins in the House, control of Congress will determine how much of the administration’s agenda can continue. Loss of the House would likely result in legislative gridlock rather than policy
• The administration’s general policy direction is pro-growth, with emphasis on spending and industrial policy. Although industrial policy (semiconductors, rare earths, oil) may introduce inefficiencies, the government’s efforts to push investment into the economy may support growth in the near term. The fiscal deficit remains wide and is likely to accelerate even further until after the midterms.
• The Fed: President Trump has pushed hard to promote his preference for lower rates, and seems likely to appoint a docile Fed Chair that will echo his We think it is an underappreciated risk that investors will be unnerved by a Fed that has visibly lost independence, potentially keeping longer term interest rates higher than they otherwise would be.

(Source: Sage Mountain Advisors analysis)

Geopolitical Commentary

• We expect intermittent geopolitical turmoil as the administartion has turned more interventionist, but significant disruption / large-scale conflict is not our base
• On January 3rd, the S. conducted a military operation in Venezuela to capture President Maduro. The operation depended on special operations, intelligence, naval flexibility, and stealth capabilities. For investors, this reinforces a multi-year outlook of structurally higher defense spending, not only in the U.S. but across Europe and the Indo-Pacific (including Japan). Defense procurement is increasingly skewed toward high-tech, asymmetric, and cyber-enabled capabilities.
• There is a long history of U.S. intervention in Latin America, and Maduro’s epic mismanagement tested the patience of both the Venezuelan people and neighboring countries (refugee crisis). Accordingly, other countries’ objections to this event will take the form of words, not deeds.
• The long-term implication of the S. intervention is a downside risk to oil prices, but Venezuela’s oil infrastructure will take years, and a stable government, to rebuild.
• In response to the S. taking a “might makes right” stance, it is possible that China may push harder on Taiwan and the South China Sea, or that Russia may intensify pressure in Ukraine and Central Asia. However, the U.S. action doesn’t really change the underlying risk-reward calculus that these countries face.
• U.S.–China relations are currently in a tactical détente following high-level engagement, with tariff escalation paused into mid-2026. Strategic rivalry will remain high around technology, supply chains, and strategic materials. China remains the primary long-term geopolitical variable, despite short-term stabilization.
• Expect intermittent volatility, but not a collapse in the macro or market

(Source: Sage Mountain Advisors analysis)

Comments on Gold

• Although it has been “money” since antiquity, we don’t view gold as a productive asset (it has no cash flow). We do view it as a portfolio diversifier and a hedge against Gold’s usefulness rises when investors start caring more about real purchasing power, debasement risk, and threats to the dollar’s position as a world reserve currency.
• Gold had an extraordinary year in 2025, returning 64%, the highest rise since 1979. While gold was notoriously poor in the 1980s, 1990s, and parts of the 2000s, its performance has been so strong in recent years that gold has almost matched the S&P 500 over the past
• Our Outlook: We have not recommended a dedicated gold exposure, preferring to address inflation risks through investments in real estate, higher yielding instruments and However, we believe that (1) deficit-driven spending pressure persists, (2) dollar debasement risk remains

non-trivial, and (3) structural diversification away from the dollar continues. Accordingly, we are exploring taking a position in gold, but are reluctant to initiate a position when consensus is extremely bullish. In other words, we are monitoring but haven’t changed our guidance.

• When does gold tend to perform well? Historically, gold tends to work best when:
  • Real rates are falling or negative (currently, rates are positive).
  • The dollar is weakening (gold is typically priced in USD, so USD weakness often shows up as higher USD gold prices). The dollar has recently fallen against many currencies but is not particularly weak overall.
  • Inflation uncertainty is rising (not CPI data per se, but rather the market repricing policy credibility and future inflation risk). Despite Fed rate cuts, the intermediate to long end of the curve have not fallen, reflecting uncertainty.
  • Tail risks rise (geopolitical stress, financial stability episodes, recession/panic correlations). We don’t believe we are currently in a crisis nor that risks are particularly high.
  • On top of this, we believe sentiment is currently elevated for gold and silver, possibly making this a poor time to start a position.
• How has gold performed after very strong performance years? The data is Using Stern

professor Damodaran’s data, after very strong years (≥ +50%), the record is mixed (with wide ranges)

• From the 1970–2025 period in that dataset, the years with ≥ +50% gold returns were:
  • 1973: +72.96%, then 1974: +66.15%
  • 1974: +66.15%, then 1975: -80%
  • 1979: +126.55%, then 1980: +15.19%