Eoin Treacy's view

Here is a link to the note of the PDFs.

Gundlach notes the theory that Trump may be so “diabolical” he is intentionally trying to tank the economy and stock market in order to get the Fed to cut, and then remove tariffs next year in the lead up to election. He doesn’t offer his opinion on the theory though. Later when asked about it in Q&A, says it’s a bit of a conspiracy theory but that may be what he’s doing.

He does note that several key recession indicators are increasingly flashing red, particularly the yield curve-based NY Fed recession probability measure and the differential between consumer expectations and present situation assessment.

This idea that President Trump has a plan to make sure the economy is humming in the run-up to the Presidential Election is gaining ground on Wall Street and elsewhere. David Rosenberg put out a tweet last week expressing the same sentiment. 

Maybe Trump is a genius, after all. What if he finally gets the steep Fed rate cuts he has been demanding? After that, he ends the trade wars, tariffs go to zero, and the stock market surges to new highs -- just in time for the 2020 election!

I agree it is certainly possible he is self-absorbed enough to try and attempt to shape the economy’s prospects to his own interests but there is an alternative interpretation which does not get a lot of airplay.

Maybe President Trump is in fact serious about trying to force China to abandon its mercantilist totalitarianism. Maybe he really is serious about trying to curtail illegal immigration. Maybe he really is serious about resetting the USA’s terms of engagement with its allies and adversaries alike. It seems to me that taking him at his word and observing that his actions gel with his statements, to a greater or lessor extent, is about deemed to be an even bigger risk than assuming he is a strategist like no other. Perhaps the biggest question is, does Trump believe that by sticking with his convictions, voters will support him because he is not being swayed by opinion polls like every other politician? Ockham’s Razor anyone?

I have been talking in the audios/videos that I do not think it is too late to avoid a recession but the risk grows the longer the Fed waits to cut. Meanwhile the stock market action continues to look like a bullish consolidation following last week’s upside weekly key reversals.