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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Did The 'Trump Tantrum' Just Trigger The Next US Recession?

Economics / Recession 2017 Nov 22, 2016 - 01:45 PM GMT

By: Gordon_T_Long

Economics

Trump May Have "Pricked" The Global Bond Bubble

Trump called during the campaign for a $1 trillion infrastructure package, $5 trillion in tax cuts, increases in military spending and the repeal ObamaCare, which could cost more than $350 billion over 10 years. At the same time, the president-elect has promised “not to touch” Social Security or make cuts to Medicare. The moment Trump was elected the markets immediately reacted to this potential massive fiscal injection. Bond values plummeted as yields spiked.


Over $1T in global leveraged capital evaporated almost instantaneously.

Trump's Threat Of Protectionism & Potential Retaliatory Tariffs

Less precise than the inflation expectations being "baked in"was the pricing in of a potentially slower global economy due to Trump's threat to renegotiate existing US trade agreements. His campaign rhetoric signals the likelihood of protectionism, tariffs and trade wars. None of this is particularly encouraging for growth projections especially with already slowing global trade volumes and for further increasing protectionist measures on-top of those already implemented.

Brink of Recession

Trump's "pro-growth" policies may play well to the electorate and to future economic expectations, but in the short term the realities are such that they he may very well have pushed the US over the brink of a potential pending US Recession!

US INVESTMENT GROWTH APPEARS NOW AT THE TIPPING POINT

THIS LEVEL OF CIVILIAN EMPLOYMENT RATE HAS ALWAYS BEEN A PRECURSOR TO A RECESSION

LEVERAGE CORRELATION TELLS THE STORY

We are Due for a Cyclical US Recession

What could be different with this recession?

  • First, it is going to be truly global – essentially all Emerging Markets would experience a recession (for them it would be far worse than 1998 though).
  • Second, the Developed World Central banks are out of traditional ammunition (zero to negative rates everywhere).
  • Third, the debt levels and excess leverage in use today are unprecedented within the public sector, corporate private sector and overall households,

The list goes on!

Expect it to get ugly in 2017 after the election honeymoon wears off (and that honeymoon already seems pretty rocky)!

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Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that you are encouraged to confirm the facts on your own before making important investment commitments. © Copyright 2013 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or suggestions you receive from him.

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