The trump administration is telegraphing their economic plan right before our eyes. They are looking for short term pain in the stock market and the economy in order to build back the rest of Trump's term.
Let's look at the facts. Every president has been happy to allow illegal immigration because the cheap labor fuels economic growth. Reduced immigration risks slowing growth and weakening the labor market.
DOGE is solely focus on cutting spending and reducing the deficit. Government spending has fueled the stock market's bull runs since the Great Financial Crisis in 2008. Government spending is a stimulating measure for the economy. Cutting government spending is a contractionary measure.
Listen to Trump in that top video -- "We are not worried about quarterly returns in the stock market. China has a 100 year outlook."
Listen to Bessent in that bottom video -- "Over the medium term, which is what we're focused on, it's a focus on Main Street. Wall Street's done great, Wall Street can continue to do fine, but we have a focus on small business and consumers. We are going to rebalance the economy."
They are clearly mapping out their plan of short term pain for long term gains. Bessent notably said they are "focused on the medium term" and the "Trump economy begins in 6-12 months."
The Biden administration propped up GDP with Government Spending much like the last few presidents have done. I am not getting political here, these are outright facts. We recently saw the Atlanta Fed change their 1st quarter economic projections from +3% in growth to around -2% contraction.
Trump continues to say he is not concerned about market's reaction to Tariffs. It's very clear Trump in his 2nd term is much different from the one in his 1st term where he'd yell at Jerome Powell daily on Twitter to lower interest rates. He is hyper focused on getting interest rates down still, but they have a plan how they will contract the economy and let this recession take place in order to build a newer, stronger economy.
I am currently operating under the assumption that we'll be in this difficult environment until we get to rate cuts. A loose monetary policy environment like '23 & '24 is when growth stocks are in favor. A tight monetary policy environment, like we're currently dealing with is when valuations matter most and growth stocks stumble. Because of this the risks I take will be much smaller, knowing we'll have a better environment down the road.
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