From Dow Jones Newswires via Morningstar, March 5:
Traders are starting to price in the possibility that the U.S. economy might fall into a recession - and one Wall Street veteran says that might actually be the Trump administration's plan.
Charlie McElligott, a strategist at Nomura dubbed Wall Street's most wired analyst by the Financial Times for his manic missives focused on the options market, laid out the argument in a note to clients.
He said President Donald Trump and his administration need an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda.
In another note to clients on Wednesday morning, McElligott cited remarks made by Treasury Sec. Scott Bessent on a focus on small business and consumers that will require a "rebalance," as Trump in front of Congress on Tuesday night spoke of being "okay" with a little disturbance from tariffs.
The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending.
On the betting market Polymarket, a 37% chance of a U.S. recession this year is now priced in.
Rate-cut expectations are increasing, and the U.S. dollar index DXY has dropped 4% from its highs of early January, while Democrat Joe Biden remained in the White House....
....MUCH MORE