Trump/Musk Recession

If we define an economic recession as two straight quarters of negative GDP, then we must consider it likely that a recession is now underway (Q-1 2025) and that it will continue for at least several quarters this year.

The latest GDPNow forecast from the Atlanta Federal Reserve projects the change in real GDP at -2.4% for the first quarter of 2025.

And President Trump admitted today in a Fox News interview that not even he can rule out an economic U.S. recession on the near-term horizon. 

While it may not matter exactly what will have caused this upcoming recession, here are three of the potential contributing factors: 

1. Elon Musk and his DOGE actors have been and continue to cause major negative disruptions in Government spending and employment.

2. President Trump's threat to impose major tariffs on our largest  trading partners has generated extraordinary levels of uncertainty in the business community and also among already cash-strapped consumers.

3. Major changes in U.S. foreign policy by the Trump Administration have shaken the "global world order" and have introduced potential doomsday scenarios that could negatively impact all the populations on planet Earth.

I am not sure if any investments are safe right now. Principal preservation must be the very highest consideration in any portfolio planning until the dust settles (which may not be for at least several quarters).

I think that short term Treasury securities are still safe, but I am not even sure about this once incontrovertible statement.

Gold, Silver, and precious metals stocks would seem an obvious choice in this expected "risk off" environment. However, if there is a liquidity squeeze (as I now project), then even these "safe haven" investments will come under downside pressure.

The U.S. stock market is already under significant selling pressure, and I continue to expect a serious bear market to unfold which will test the lower limits of everyone's imagination on the downside.  A 20% correction now seems likely, and I would not rule out a decline in the major indices of at least twice this projected loss.

Bottom Line: Cash is King for now!

 

Trump's Election Is Now Fully Discounted in U.S. Stock Prices!

Just a quick note here regarding Trump's successful return to power as the next President of the United States.

Yesterday, Wednesday, November 6th, U.S. stock prices rose sharply, U.S. Treasury securities fell sharply, and gold and silver prices also fell sharply.

And about halfway through today, the S&P 500 topped out at about +0.75% on the day, the Nasdaq Composite topped out at about +1.5% on the day, and the DJIA and Small Cap stock indices have been flirting with the zero line after monumental gains yesterday. Bond and Precious Metals prices have also bounced modestly so far today.

The Federal Reserve just lowered its Fed Funds rate target by 25 basis points, which was consistent with most Wall Street forecasts.

What now? It looks to me like all the potential positive news relating to Trump's victory is now fully discounted in stocks, bonds, and precious metals prices. 

Bottom line: I believe that U.S. stock prices are now at or very near a major top. I see safety in bonds and precious metals related investments. Elon Musk is likely to accept an invitation from the new Trump administration to be the "Budget Czar" with a potential mandate to cut up to $2 Trillion from the Federal Budget. Musk himself says there will be temporary dislocations (i.e. "Pain") for many Americans during this process, but he says that in the long term most Americans will be better off. I doubt whether most Americans will be better off, but I do believe the "pain" portion of Musk's comments. Consistent with the pain that is surely forthcoming, an economic recession is now likely to begin in the first half of 2025. Forward-looking stock market investors will soon see the early signs of a recession and will exit stocks in earnest over the very near term.