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There is no better way to gauge the macro policies of the new US administration than being privy to President Donald Trump’s discussions with the new Treasury Secretary, Scott Bessent. While we do not have inside information, we have put the pieces of the puzzle together to help clients see the big picture. This report presents our take on a hypothetical conversation between President Trump and Scott Bessent that led to the latter’s appointment as Treasury secretary.
Our thoughts on this morning’s CPI release and some upside risks to inflation that could flare up in the months ahead.
In our Alpha report, we reiterate that we expect President Trump to curb his most enthusiastic plans for tax cuts due to the pressure from the bond market. That will be good for equities in the long run – as it will assuage the pressure on yields. However, it should be negative for the USD as investors grapple with far less fiscal support for the US economy over the next four years than expected. We also give our readers a blueprint for following the news flow when it comes to trade policy. Stick to a framework and ignore tweets.
Our outlook for Fed policy in 2025 discusses our expectations for interest rates, the Fed’s balance sheet and the 2025 strategic review.
- Congress will pass tax cuts by end of 2025 producing a fiscal thrust of about 0.9% of GDP in 2026.
- Trump will count on that stimulus as a basis for slapping tariffs on leading trade partners.
- China will retaliate against Trump and stimulate its domestic economy, while pursuing stronger trade ties with other countries. Europe will also retaliate.
- Geopolitical risk will shift from Ukraine-Russia to Israel-Iran, where the conflict will continue to escalate until a crisis point is reached within 2025.