Journalist: Last Wednesday Wall Street celebrated a new S&P500 record. It was his last joy. This Tuesday the Russell 2000, the basket of small shares, premiered a drop of 12.6% accounted for since its maximum of November 25. What happened? What awaits us: new records or a correction in the bag?
Gordon Gekko: President Trump has the floor. You have to recognize that he copied the scene. Inside and outside the US. He dictates the world’s agenda. The others are accommodated as they can.
Q.: The president already practiced very sudden turns. No one, except Putin, thought that Ukraine had started war. No one, except Trump, could think of finishing fighting within a peremptory period. Where will markets take their inspiration? From a fabulated story or the ability to twist reality?
GG: European stock markets are flying. They are not harassed by doubts that complicate Wall Street lately. Reality is always imposed, but the bags anticipate. And judging by the thrust of the European defense companies, which lead the progress, buy the scenario of a nearby peace under the special conditions promoted by Trump.
Q.: With Europe, increasing military spending significantly.
GG: They already listened to JD Vance, the vice president, in Munich. If Poland can spend 4% of GDP in its armed forces, and be a history of economic success, others can also.
Q.: I don’t know if they can, but they will not have another alternative. Trump is determined to claim the Russia of Putin, and will allow him to keep the territories occupied in Ukraine. It is a living threat that Europe must attend on your own. He cannot trust his ally of yesteryear.
GG: It is the effective way Trump found to get yours. Eight years ago I did not get to spend 2 points of the GDP in defense. Today the Europeans themselves seem little.
Q.: Trump gives a slap to Europe, and his bags take it well. How to understand that, if the idea is Make America Great, the Russell 2000 loosen your arms like that? They are companies that live from the local market, with little presence abroad. What pushes them to a correction by just over a month of the presidential assumption?
GG: He already saw the data. The US stopped dry. And these companies feel more than anyone. They don’t have big backs.
Q.: Do you think Trump hit his feet? What all this stir is counterproductive? At least, within the US.
GG: The consumer’s confidence, measured by The Conference Board, sank in February at the lowest level in 3 and a half years. It is not very different from what the University of Michigan recorded. The PMI report detects the same erosion in the confidence of the business world. According to its estimate, to the levels of the pandemic. The confidence of the construction companies also cleared.
Q.: The feeling is an intangible, not very easy to measure precisely, and extremely variable, or not? What does the hard data say?
GG: We have soft and semi -a -sized data. Trump has just been in the White House for 40 days. They are trust records, inflation expectations and activity surveys. Everyone says the same. What worked very well until the end of last year, he resented. I imagine that we will have a calm reading of the January consumption deflator, which is the inflation reference that the Fed uses. That will give us a break. But we don’t inherit the problem last year. It is a new mishap, it is in diapers, it fogonea Trump with its policy ads. It is a deterioration, nothing more. Nothing was yet broken. But it goes on a bad way …
Q.: It will depend on the measures you take.
GG: That’s how it is. The ads can take the wind, and it will not happen much. If Trump puts tariffs on Canada and Mexico will be a frontal shock. And I don’t tell a 25%aliquot, the fifth would suffice to cause a headache.
Q.: Wall Street flirted with records, last week, because it discounted that Trump’s agenda was a Bluff. Now he takes it seriously?
GG: No. That was not modified. That is why the S&P500 is only 3.4% of records. But the mere threat is harmful: the economy came down. The ads are not harmless, they have real effects. That evidence is the one that suddenly surrounded the last five wheels.
Q.: There is no evil that for good does not come. The bonds are no longer scared. The ten -year rate fell to 4.30%. Half less than the maximum of January. The concern went to the actions. On the health side of the activity.
GG: Trump’s agenda is not exhausted with tariffs. It also aims to reduce taxes. Try to extend the validity of the sales package that was approved in 2017. And also to produce new cuts. If the government manages to pass the laws through Congress – through the simplified procedure – the bonds will have to deal with the ghost of an important leap of the fiscal deficit, despite the chainsaw of Elon Musk. But, for now, they left the danger zone.
Q.: The markets put a more active Fed in prices, perhaps inclined to resume rates as soon as in June. How do you see it?
GG: If the economy weakens, above all, if the labor market turns on a yellow light, the Fed will want to follow the booklet of its points map. There are two casualties scored by 2025. But to execute them, inflation expectations cannot be shot as they do today in the vision of the consumer. A very bad management of tariffs and fiscal policy could sink us into the worst of the two worlds, approach a recession and feed higher inflation. Today is a distant scenario. After all, we come from the opposite situation. And there are no reasons to enter there. The sooner the uncertainty is cleared, the better.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
