No doubt, looking at cyclical names the recession watch is officially on. Not just a softening 10-yr yield but the 3 month to 3-year curve (Fed preference) is inverted again. Yes, tariffs and trade policies and cutting government spending all provide a lack of clarity, which will exacerbate the decline, but, more importantly, Trump knows a recession is already baked in (ISM surveys and other forward looking surveys said growth was slowing before he took office) and better to get it out of the way early so as to recover from it mid-term.
This will also allow for tax cuts and monetary easing from the Fed, which we will get if the recession is obvious.
I don’t think Bessant has this right. Even if tax cuts spur the economy, and they will, it’s hard to bridge that gap w the timing. But, as usual with the disingenuous politics of this board, this recession was already in the offing pre-Trump. We should’ve already had it with the two year inverted curve environment under Biden, but we threw too much government stimulus at the economy. Which is not a healthy and sustainable dynamic longer term. The Covid stimulus should’ve been a one-year event, not a three-year event.
As far as the market, sentiment is really negative now and the $VIX almost hit 30 today, so a rebound in the near future shouldn’t be unexpected.