LIVE MARKETS-Is a Trump recession coming? Not so fast

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IS A TRUMP RECESSION COMING? NOT SO FAST

Steven Blitz, chief U.S. economist at TS Lombard, writes in his latest research note that a recession under President Donald Trump is probably not in the cards. He adds that weaker, not weak consumer confidence numbers, reflect a worse inflation outlook, not weaker growth.

After a strong fourth quarter, U.S. economic numbers had been soft, especially sentiment, which Blitz believes "gives over-extended markets the opportunity to correct."

The TS Lombard economist cites bad weather, massive California fires, and the lag from the Federal Reserve waiting too long to cut interest rates, as some of the factors for the current weakness in the economy.

But market participants, he says, are ignoring these factors and instead are looking at deportations, tariffs, slashed government programs, and firings of federal employees. What it does highlight, Blitz says, is what some economists have long been saying: that without federal spending, the economy's direction is headed south.

On government job losses, Blitz acknowledges that they do hurt, but people should keep them in perspective.

"The economy rises and falls with private employment, specifically higher income, higher skilled employment." Blitz notes that in mid-2024, private employment declined and the economy languished, even though government employment rose.

The recent rise in growth is tied to private employment levels, he says, and so the drop in government jobs is "unlikely to be the negative some are positing."

Blitz further writes that his "secret sauce" for growth in 2025 has always been increased private capital spending "boosted by Trump in spirit and deed, as opposed to quashed by his actions."

Right now, he says there is too much noise to confirm whether current data signals a weak enough 2025 for the Fed to cut twice. "My bet is still on expansion with no rate cuts – but the tails of the distribution are always fatter than what models imply."

(Gertrude Chavez-Dreyfuss)

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