Posted on 11/25/2025 10:14:01 AM PST by E. Pluribus Unum
The view that the stock market is in a massive bubble and bound to crash is incorrect over the medium term
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After the so-called “liberation day” tariffs announcement, the conventional wisdom about the US economy became very pessimistic. A new consensus was built on worries over tariffs, policies such as restrictions to migration, unfunded large fiscal deficits, threats to the independence of the Federal Reserve and the erosion of rule of law.
The argument was that American exceptionalism was over — the US economy was facing stagflation, the stock market was set for a slump or worse and the exorbitant privilege of the dollar as the major global reserve would erode. As the US weaponised its currency, the value of the dollar would start to fall rapidly over time.
In a recent paper of mine and a companion one by my Hudson Bay colleague Jason Cuttler, we reject such pessimism and have a much more positive outlook for the US economy and markets over time.
First, market discipline, reasonable advisers and Fed independence provided guardrails on the worst policies after “liberation day”. As markets corrected sharply soon afterwards, Trump was forced to blink and negotiate more reasonable trade deals.
Thus, the US is experiencing a few quarters of a growth recession (GDP expansion below potential) and a modest rise in inflation rather than a serious stagflationary recession. By next year growth will recover as monetary easing and...
(Excerpt) Read more at ft.com ...
Yogi Berra: “It’s tough to make predictions, especially about the future”.
I’m a RELUCTANT LITTLE BABY BULL WITH BEAR-LIKE TENDENCIES.
I’m like a farmer who owns fields where the bulls and bears roam.
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