Steen Jakobsen, Saxo Bank’s chief investment officer, discusses his strategy for investing in global equities and the possibility of a U.S. recession with Bloomberg’s Guy Johnson and Matt Miller on “Bloomberg Markets”.

Link if video does not play, or to see a larger view: Trump Increases Odds of US Recession

Ten Key Points

  1. Steen has 25% equity allocation.
  2. Miners and information technology are his two key areas.
  3. Recession odds have been at roughly 60% for a long time according to Steen’s basic model.
  4. Trump policy makes recession odds even higher.
  5. Cost of capital has increased significantly.
  6. Some of his very smart friends believe in the Trump story but Steen is skeptical.
  7. Trump is building a wall not just around Mexico but all of the US. This will reduce global trade massively.
  8. Nixon recession is the platform Trump has adopted even though China relationship heads opposite to what happened under Nixon.
  9. The drive higher in the US dollar since 2014 has been about the dollar cost of capital for funding, not the policies of Trump.
  10. Fed, Trump, some corporations including J&J all looking for weak dollar policy.

Like Steen I have viewed that a US recession has been likely for some time. And also like Steen, I believe Trump’s protectionist stance is a bad thing.

We will soon find out.

Mike “Mish” Shedlock