Journalist: President Trump is at ease. It is a hurricane that announces increases in tariffs and commercial wars, deported undocumented, is involved in international politics and in the conflicts existing at the same time that creates other incipients. It is surprising, above all, its avidity of territorial expansion. And pushes an internal dynamic that does not leave him. Turn the administration from top to bottom, freeze agencies and perform purges of officials, and puts under the magnifying glass – through Elon Musk – to the Treasury payments. Trump enjoys, markets don’t seem to celebrate so much. Wall Street Lucia more thriving in November when Trump won at the polls, but was still far from handling the White House commands.
Gordon Gekko: The assumption and inaugural speech was very good. Don’t forget. The S&P 500 established its last record, a couple of days later. But to achieve this Trump appealed to the trick of not mentioning the increase in tariffs. He showed the friendliest face of his agenda. And now that it is executing it, the rispideces and the dangers are evident. However, the bag is shot by records. He did not cancel the rally, at all. He wants to see more to convince himself. Given the level of uncertainty, and the aggressive style of government management is not bad.
Q.: There are already those who doubt Trump 2.0 is as friendly to business as supposed.
GG: It is less friendly than what the cliché said. But, there is too much uncertainty and indefinitions to issue a verdict. It is not confused. On the other hand, the bond market, unlike the stock market, is more relaxed. And, in that sense, I think that, for Wall Street, with a medium-term vision, we attend a better trace-off.
Q.: Why?
GG: The bull market of the shares is bulletproof. The strength of the real economy takes care of your back. The bonds were very vulnerable during the electoral campaign to the perception of an unstraving management of public accounts. The Fed is confident that it has inflation under control and will return to the goal of 2%, although in the events it still did not happen. And Trump’s policies could well take more firewood. If that conviction of underlying stability cuts, and deteriorates, we are in trouble.
Q.: This is what the rapid rise from long rates of 3.60% to 4.80%, from September to January. A RETUAL ADVANCE OF THE FED CONTRAMANO.
GG: Believe or not, and despite all the noise for the tariffs that are far from appeasing, since Trump assumed, the bonds won in confidence. The rise of rates was partially reversed, but, above all, he gave the vertigo that encouraged her. We were right to break 5% and now we parked around 4.50%. No one can be sure of where Trump wants to take us and if he will succeed, but before the bonds ran frightened and now he does not affect them.
Q.: What happened? Did the markets believed the secretary of the Treasury, Scott Besent, when he said that the president is focused at the rate of 10 years and the imperative need to be reduced?
GG: Nothing more sensible. The rise of long rates was the only force that made Trump seriously oppose, I would say, since he won the choice. How is it going to be credible. But it is not the only thing that influences.
Q.: What else?
GG: All the angry reaction that Elon Musk awakes by putting the noses in the different vericuetos of the administration, and the questions, which are growing and that quickly reach justice, all that is music for the bond market. Perhaps public spending can be significantly cut significantly.
Q.: Do you think?
GG: It was a “Wild Card”, and indeed, Trump is playing it by managing Musk, despite the fierce criticisms of his own legislators and supporters. And it should be noted that the fiscal deficit is excessive, more than 6.4% of a PBI in thriving, but public spending is not. But you can always cut fat and waste. And that proceeded was not in the calculations.
Q.: Will it cut 2 billion dollars of spending as promised in campaign?
GG: The discretionary expenditure, which is where it can be cut, does not reach that figure (in a year). Musk points to half Billón, which would be remarkable.
Q.: That’s why the bonds were calmed?
GG: It is not a single factor, I think. But suddenly the expense will stop growing, and reduce. The tariffs are going to rise, not as much as a Trump voices, and not so much as to strangle imports, because they will rise so that Besent takes advantage of the increase in collection by that route to lower other taxes. Besent was a staunch critic of the management of debt placement that Janet Yellen made, biased to the short deadlines, but now that he is at the helm, he copy the libretto. Ergo, there will not be a relative increase in the emission of long bonds. The policy squeaks by Musk, but did not fix the problem of debt roof. Trump can push a partial closure of the government and thus cut the real expense and not just postpone it. Musk will nurture recommendations about where surgery can be done. Thus, if one ties ends, there is a fiscal space where there was no. And take place to Trump’s agenda without forcing a shooting of the 10 -year -old rate. The strength idea is that long rates fall. And that the Fed is advisable that it can also resume the decrease in short rates in the second half of the year.
Q.: Do you think it possible?
GG: Yes. And if this is not Besent’s plan, agreed with Trump, he should not walk far.
Source: Ambito
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