Publications
Affordability, America’s Achilles’ Heel
In an economy that remains wealthy yet increasingly fragmented, purchasing power has become Washington’s primary test.
The United States remains a rich country, but one that is increasingly unequal, where social mobility is failing for a growing share of the population. Income disparities are markedly wider than in Europe, with society fragmenting between prosperous areas and regions left behind. The gap in life expectancy between these two realities now exceeds twenty years. This is no longer merely a question of income, but of living conditions and health. Inflation weighs most heavily on the most constrained households, whose budgets are concentrated on housing, food and energy, and who lack both financial savings and assets to cushion rising prices.
The Trump administration now finds itself under significant pressure. Without a tangible improvement in purchasing power, political risk is rising rapidly, even among segments of the electorate traditionally favourable to Republicans.
Between Immediate Announcements and Structural Reforms
Since the summer of 2025, Washington has relaunched a series of highly visible tax relief measures. These include an increase in the standard deduction, exemptions on tips and overtime pay, and expanded benefits for retirees, complemented by targeted support, particularly for the agricultural sector. Taken individually, these measures appear modest; taken together, they represent a massive fiscal cost of several trillion dollars over ten years, amounting to hundreds of billions in foregone revenue each year.
The goal is to provide rapid support to purchasing power and send strong political signals, even at the cost of widening the deficit and increasing reliance on public debt. As the midterm elections approach, further announcements of a similar nature are likely, targeted at specific voter groups and designed more for electoral effectiveness than for overall fiscal coherence.
Since January 2026, a presidential executive order has encouraged major funds and financial conglomerates to reduce their exposure to single-family homes.
In the residential real estate market, the main pressure point for the middle class, the government is attempting to ease the burden on households without triggering a sharp price correction. Contrary to market expectations, Fannie Mae and Freddie Mac were not privatized to generate revenue. Instead, their mandates were adjusted in favour of affordable housing, with loan caps raised to around $830,000 for a standard property. The White House has also asked them to launch a large-scale mortgage repurchase programme of approximately $200 billion to help contain interest rates, even though the expected impact remains modest, around a quarter of a percentage point.
Closely aligned with public policy priorities, these two agencies are expected to continue playing a key countercyclical role, securing and facilitating the transmission of credit between banks and households.
State Capitalism Confronted with a Difficult Equation
Scott Bessent had announced a change of course: less implicit support for financial markets and greater focus on the real economy, households and small businesses. Early statements reflected this stance, with an assertive tone directed at the Federal Reserve, high finance and major banks.
However, the signal did not last long. Markets quickly understood that public liquidity would remain abundant. Wealth disparities continue to widen, reinforcing the dynamic of a two-speed economy, where asset holders advance more rapidly than the rest of the population. The promised detox increasingly resembles reinforced interventionism, distributing rents and targeted support under a populist veneer.
The affordability challenge remains unresolved. It depends simultaneously on price levels, real incomes and the cost of credit. Public action can cushion the shock, but it cannot durably solve the equation through subsidies, tax benefits and interventions in interest rate markets alone. The structural solution is less politically visible: increase supply, improve market fluidity and support sustained growth in real incomes over time.
The openly displayed proximity between political power, large fortunes and financial interests is also fuelling growing mistrust, including among parts of the Republican base. Recent opinion polls show an erosion of support. The decisive test will come from the markets, which will determine in the coming months whether they continue to finance smoothly a Treasury facing very substantial refinancing needs.
February 13, 2026
Publications
Publications
Letter from the CIO - February 2026Markets in Transition: Fewer Obvious Trades, Greater Balance
February 12, 2026
Publications
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January 15, 2026
Publications
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January 12, 2026