Trump Took Over Biden’s Stable Economic Growth And Easing Inflation— And He’s Already Upended That

Are You Personally Prepared For The Trump-Musk Recession?

Yesterday CNBC reported that “An ominous measure that the Federal Reserve considers a near surefire recession signal again has reared its head in the bond market. The 10-year Treasury yield passed below that of the 3-month note in trading Wednesday. In market lingo, that’s known as an ‘inverted yield curve,’ and it’s had a sterling prediction record over a 12- to 18-month timeframe for downturns going back decades… Recent sentiment surveys have reflected consumer and investor angst over prospects that growth could slow as inflation perks up just as it appeared to be easing. In the University of Michigan’s monthly survey, respondents put their longer-term view on inflation, over the next five years, at its highest level since 1995.

Ambrose Evans-Pritchard put that into a political context earlier this week, not that Señor Trumpanzee’s “assault on the US federal government and the world’s interlinked manufacturing system have together reached an economic tipping point. ‘It seems almost unavoidable that we are headed for a deep, deep recession,’ said Jesse Rothstein, Berkeley professor and former chief economist at the US labour department. Once the pace of job losses crosses a critical line, the multiplier effects can snowball suddenly. Prof Rothstein said monthly non-farm payrolls— the barometer of US economic health watched closely by markets— could turn viciously negative by late spring, contracting at rates surpassed only during the worst months of Covid and the Lehman crisis in 2008.”

“I think we’re going to see historically large drops. Losses of 400,000 a month are not implausible because people are getting nervous out there.

“It is not just the federal employees being fired: it’s all the other people worried they could be next, so they are cutting back too,” he told The Telegraph.

Torsten Slok, of Apollo Global, said layoffs could approach 1m after factoring in the likely chain reaction through contractors. “We are starting to worry about the downside risks to the economy and markets,” he said.

Slok said it is a mystery as to why credit spreads and equities are still so well-behaved when the US Economic Policy Uncertainty Index was now higher than at any time during the great recession.

Prof Rothstein said the damage would not show up immediately due to lag effects. The ugly months will be in April and May, but by then secondary shocks will have spread far and wide.

“There are all kinds of spillovers. Contracts for external contractors are being cut. Nobody knows how much imports are going to cost next month, or if we are even going to have accurate weather forecasts any more.

“How could you hire in these conditions? This is going to be very, very bad,” he said.

Markets are implicitly betting that Trump’s trade wars are just bluster, but he restated on Monday night that his 25% tariffs against Mexico and Canada would go ahead next week, which would instantly snarl up the North American auto industry.

“It would be devastating,” said Ford’s Jim Farley.

Trump has a particular loathing for the National Oceanic and Atmospheric Administration (NOAA) and its weather service, deemed the spearhead of “the climate change alarm industry” by Maga’s Project 2025.

Officials at NOAA have already been told that “climate change,” and “pollution” are henceforth banned terms. The office of management and budget plans to cut 38% of their funding as part of its campaign to root out “woke agendas.” Commerce secretary Howard Lutnick wants to abolish the agency entirely.

The surprise is that Elon Musk’s army of zoomer zealots are taking on everybody, even the US defence department. It will fire 5,400 civilian staff next week as the first stage of a 5% to 8% cull of the Pentagon staff to “cut the fat and grow the [warrior] muscle.”

…Last week’s US data ought to be a warning.

Home sales fell 4.9% in January. S&P Global’s survey of services tipped into contraction, and manufacturing held up only because of “front-running” ahead of trade wars. “February saw the US expansion falter to near-stall pace,” it said.

The NY Times doesn’t like to sound that alarming. Instead, Alan Rappeport’s report highlighted that “Trump’s abrupt moves to shrink federal spending, lay off government workers and impose tariffs on America’s largest trading partners rattle businesses and reverberate across states and cities.” He called it “signs of strain... Funding freezes and firings of federal workers combined with the prospect of costly trade wars are souring consumer sentiment, raising inflation expectations and stalling business investment plans, according to recent economic surveys. Local economies are also bracing for a sudden withdrawal of fiscal support, forcing officials to contemplate tax increases or municipal bond offerings to stabilize their budgets. While Trump has acknowledged that his policies could bring some initial pain, the early warning signs suggest that his blunt approach could come with more ominous risks to the economy.”

Michael Strain, an economist at the conservative American Enterprise Institute, told Rappeport that “There’s more uncertainty than I think is widely appreciated. All the uncertainty around trade policy, uncertainty around some of the things that the Department of Government Efficiency is doing, I think will have a chilling effect on investment plans and expansion plans.”

… “Even some of Trump’s most ardent supporters,” concluded Rappeport, “are viewing the economy with some trepidation. After stock markets plunged last Friday, Larry Kudlow, the Fox Business host who was the National Economic Council director during Trump’s first term, said investors were not happy that tax cuts appeared to be delayed in Congress and acknowledged that tariffs could temporarily lead to higher prices. ‘At least for now, the economic signals are flashing slower growth and higher inflation,’ Kudlow said. ‘Not good.’”

I’m not a financial advisor and have never worked in that industry but I would remind everyone that when right-wing economic policies fail— and they always do— it’s regular people, not billionaires, who pay the price. With economic warning signs started to flash ominously I would suggest maintaining liquidity— building or maintaining an emergency fund covering at least 6–12 months of essential expenses— cutting back on discretionary spending, and avoiding new high-interest debt like credit cards or personal loans. Paying off credit card debt and other high-interest loans can provide some financial breathing room. If you have a 401(k) or other investments, now’s the time to check your allocations. Overexposure to the stock market, especially in industries reliant on government stability or international trade, could be risky. Bonds, commodities, and inflation-protected securities may provide more stability.

Trump’s policies are going to drive inflation up while gutting government assistance. If you rely on healthcare subsidies, housing support or other public benefits, now is the time to research state-level programs that might provide some stability. I have a feeling that as federal budget cuts ripple through state and city economies, it would be insane not to expect job losses, service reductions and local tax hikes. If you work in a sector that relies on government spending— education, healthcare, infrastructure— it’s worth considering how deep the cuts could go and planning accordingly. Or… talk to a financial sector professional.