Why a Recession May Never Come... and Why Gold Still Wins

**Andrew Sarna** (0:00)
There's a limit to how high treasury yields can go. If the US is running a 6% to 7% deficit, I just don't even know how a recession is possible. 40% of the US.
S&P 500 is concentrated in 10 names. There's no way the US or the rest of the G7 are gonna balance their books. That's just another bold case for gold.

**Maggie Lake** (0:33)
Hello, and welcome to Wealthion. I'm Maggie Lake. Joining me to discuss the outlook for global assets is Andrew Sarna, portfolio manager at Fourth Lane Partners. Hi, Andrew. It's great to see you.

**Andrew Sarna** (0:43)
Hi, Maggie. Thanks for having me on.

**Maggie Lake** (0:46)
So it seems like we've got a lot going on, even though it's the summer period. And it seems like the direction of interest rates could maybe set the tone for equities, precious metals, currencies in the second half of 2026 What's your outlook for bonds for US treasuries?

**Andrew Sarna** (1:03)
For two reasons. One, just financial market functioning.
We went through our 2026 high. And then for the second reason is just financing the US deficit. You and I both know that if treasury yields go too high, the US government budget is insolvent. And I just see it as really there's a cap on yields. And while there's not a firm cap yet, while we haven't seen actual yield curve control, there's an implicit target. And I think it was really the bond market pulling Trump back from what seemed like aggressive posturing versus Iran and back to the negotiating table.

**Maggie Lake** (1:50)
That's super interesting. And it has very large implications as we go.
If that is true, the maybe issue for the Trump administration is inflation though, right? Commodity prices. Do you expect them to remain high? How is that going to impact this sort of balancing act when it comes to the bond market? Because if the bond market sees inflation running high, even if Trump and Besson want those rates, that's sort of contrary forces at work. How do you see that playing out?

**Andrew Sarna** (2:27)
Yeah. I think that's why we are where we are today, where I would say the reality out of the US administration seems to be different now than what is occurring on the ground.
Throughout the conflict, really, the administration has been trying to talk down and jawbone oil markets, which, as you know, and as you point out, could become a major issue into midterms. And I think back to Trump's first term, and his red line back then was almost the S&P 500
Investors looked at the market and said, if the S&P 500 falls below a certain level, Trump is going to step in. And I think this time around, it really seems like it's a combination of oil markets and the 10-year, and then to an extent, inverse S&P 500 and the US dollar that are dictating his behavior. Obviously, Trump is stuck between a rock and a hard place. He doesn't want, he needs to save face, and he can't commit, or he can't be seen as losing to Iran ahead of midterms, but he also doesn't want to get into a deeply unpopular conflict. So it's really about walking this tightrope. But I think the challenge is going to be, you can only talk down physical commodity markets for so long until the actual physical markets matter and dictate the paper market's hand.

**Maggie Lake** (4:05)
So it's interesting, we've got a Fed meeting, and Warsh is sort of newly in the job. What kind of sort of pressures does this put on him and the Fed board?

**Andrew Sarna** (4:18)
It's funny because earlier, early in the week, we had a report out of Citadel, or report from Bloomberg, citing that Citadel saw hikes, hikes coming for the meeting, which it's kind of hard to believe Citadel probably to trying to drum up some trading activity.
But look, I remember when he, when this selection process was occurring, and I mean, the narrative was Trump was going to pick a yes man. I don't think you're going to, or I don't think he appointed a Federal Reserve Chairman who is going to defect during the second meeting. If anything, I think these people have seen us like stay out of the limelight. You don't want to find yourself in Trump's targets, because we've seen so many exes from the administration once you get on his bad side. So I think what you see from Warsh is ultimately a hawkish hold. He needs to talk down markets because we talk about how important the bond market is. But I don't think there is room for a hike.