Trump’s chaotic leadership risks pushing the U.S. into recession

What is the biggest challenge for investors? Maybe it's corruption? Maybe risks?
Actually, no. The biggest challenge for investments is uncertainty. In times of great uncertainty, investors cannot calculate risks or account for corruption. Thousands of other problems become less important.

Money flows even to countries ruled by tyrants. Investors just need to clearly understand the menu.

That’s why investments aren’t entering Ukraine during the war. Because war is the highest level of uncertainty. And the money being invested is the money already in the country, which cannot leave. And, of course, the money from organizations like the EBRD.

But this isn’t about Ukraine. It’s about the US and the world. Where it seems like there’s a temporary sigh of relief, and people have stopped fearing a recession, especially since the Federal Reserve said that the risks of a recession have grown, but not enough to jump off a skyscraper.

What are the main risks of Trump’s presidency? Trade wars? The inflation they provoke? His friendship with Putin? Musk and his firings left and right? Or again, Musk, whose behavior might lead to Tesla’s bankruptcy and a market crash?

This is chaos. And it’s much larger now than during his first administration. Because back then, Trump was surrounded by professionals who didn’t last long in office. But they kept his impulses in check. Now, Trump is surrounded by loyalists who increase the chaos in their desire to show love for the greatest leader of modern times and the best president the US has ever had.

What does this lead to? Uncertainty. And uncertainty holds back investors. Who don’t know what mood or ideas Trump might wake up with tomorrow. And this uncertainty is more dangerous than even trade wars combined.

What does uncertainty lead to? It leads to people holding back, delaying investments. Merger and acquisition deals are postponed. Firms don’t go public with stock offerings. Decisions are put on pause. And this directly impacts economic growth. And the cycle of "negative expectations — actions — even more negative expectations" begins. The tail starts wagging the dog.

What can all this lead to? In fact, everything combined may push the US economy into a recession, in the form of stagflation, and stock markets into a crash.

Of course, "may" doesn’t mean "will." But the risks of such a development are skyrocketing. And the world has already forgotten what that feels like. A whole generation has grown up where 2008 is something out of their parents’ stories.

Interestingly, 2008 was a surprise to many. The economy collided with an iceberg when what was beneath the surface was something no one saw, but that would pierce the hull. But now, the situation is the opposite. The ship is heading straight for a huge rock. And the captain sees it. But says it’s all fine. It’s meant to be this way. And the problem is that if a crisis happens and we need to find a way out, the same captain will be in charge of managing the process… in the way he knows how…

But these are just risks. Just assumptions. And maybe it will pass…

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About the author: Serhiy Fursa, investment expert, blogger.

The editorial team does not always share the opinions expressed by the authors of the blogs.