A viral post on X speculates that President Donald Trump might see a strategic upside in a recession.
What Happened: On Thursday, popular newsletter, The Kobeissi Letter, posted on X, drawing parallels between Trump’s economic agenda and the current state of the markets and the broader macro-environment.
“In a way, President Trump may actually want a recession,” the post says. “A recession achieves most of Trump’s economic goals at once,” referring to his campaign promises of low inflation, treasury yields, a reduction in trade deficits, a rate cut by the Federal Reserve, and lower oil prices.
The post comes amid soaring U.S. Treasury Yields, with 30-Year yields at 5.04%, the 20-Year at 5.05%, and the 10-Year note at 4.53%.
On Wednesday, the sale of $16 billion worth of 20-Year Treasury notes saw weak demand, marking a new low for U.S. Government bonds and rattling equity markets this week.
The SPDR S&P 500 Trust ETF (NYSE:SPY) is down 0.85%, followed by the Invesco QQQ Trust (NASDAQ:QQQ), which tracks the Nasdaq, and the SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), both down 0.11% and 1.16%, respectively, this week so far.
The post says the Trump team may be recalibrating its messaging strategy after “realizing the trade deal headlines won’t work anymore.”
“A recession may be the ‘best’ solution after years of inflation and ‘free’ money,” the thread concludes, while quoting a chart showing the S&P 500’s nearly 80-point decline in a span of 30 minutes, without any “major” news.
Why It Matters: Several leading economists, including former Treasury Secretary Larry Summers, have warned Trump to walk back on his proposed tax agenda, like he did with the tariffs, citing pressure on Treasuries.
Early this week, Summers warned that the U.S. was at risk of a fiscal crisis similar to what the U.K. experienced in 2022, calling it Trump’s “Liz Truss Moment,” in reference to the British Prime Minister who had to quit following the crisis.
Economist Mohamed El-Erian had a more balanced take on the administration’s policies, having said last month that they could either result in fairer global trade, alongside lower tariff and non-tariff barriers, or it could lead to stagflation, which he calls “Jimmy Carter all over again,” referring to the 1970s, when Jimmy Carter was President.
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