First Eagle's Matthew McLennan Predicts US Headed For Debt Crisis With Fiscal Deficit Being At 'Worst Structural Point Since World War II'

The U.S is advancing towards a significant debt crisis due to a fiscal deficit at “worst structural point since World War II," warns investor Matthew McLennan.

McLennan, co-head of First Eagle's Global Value team, expresses concern over the equity and bond market’s relative complacency. As reported by CNBC, McLennan highlights that the U.S. government’s spending has surpassed tax revenues by a staggering $1.5 trillion over the past year, amounting to 5.5% of the nation’s GDP. He terms this as “highly unusual,” since budget deficits typically shrink near the peak of the economic cycle.

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McLennan, who manages First Eagle’s Global Fund, warns that the fiscal stimulus has also posed “substantial risk,” such as a deficit of around 10% of GDP if the economy heads into recession. He questions the market’s ability to reduce the 10% deficit back to two or three percent of GDP.

Despite his bearish stance, McLennan finds gold appealing as an investment hedge. He believes gold will likely start appreciating when the interest rate cycle turns downward. Beyond gold, he sees value in stocks like Meta Platforms Inc META and Oracle Corporation ORCL, two of the top equity holdings in the Global Fund.

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