Is ‘Coup’ Against Trump Coming? (Uncut) 04-25-2025

Another 20% Market Crash, Recession This Summer; Is ‘Coup’ Against Trump Coming? | Peter Berezin

Trump has to be concerned about that. He has to be concerned that the Republicans will desert him. I mean, a lot of Republicans hate Trump.

They never say it in public. But many prominent Republicans really don’t like the guy. If his popularity sinks further, and it’s already decreasing, they’re going to basically stage a coup.

The only thing that could happen, potentially, is that things will get so bad for Trump that he’ll have to walk back the tariffs that he already introduced. I think you were calling for recession 2024, rather, for this year. Let’s see if it’s still happening.

But first, let’s talk about some recent news. We’re speaking today on Tuesday, April 22nd. And the stock markets are seeing a bit of a rebound, like you alluded to offline.

Treasury Secretary Scott Pesent says he expects de-escalation of US-China tariff fight in the very near future. He said that the next steps with China are No one thinks the current status quo is sustainable. With tariff rates at the current levels, Pesent said in a private investor summit in Washington.

Pesent also insisted that despite the US ratcheting up tariffs on Chinese imports to 145%, actually 245% on some goods, and China is retaliating with 125% duties on American goods, the goal of Trump’s policy isn’t to decouple. Well, that’s certainly looking like what it is right now, decoupling, isn’t it? Anyway, can you evaluate Scott Pesent’s comments? Well, Pesent has been promising trade deals for a long time. Remember, his mantra was escalate to de-escalate.

Well, we’ve escalated, but we haven’t de-escalated yet. And I’m very, very surprised that investors are even taking these comments that seriously. The reality is that China doesn’t have any major incentive to make a deal with the US.

China exports to the US, of course it does, but Chinese exports to the US are like 2% of GDP. It’s not a huge number. They can certainly offset that drag with stimulus if they so choose.

I think right now China is like that meme of Michael Jackson eating popcorn, sort of sitting back and enjoying the show, watching the US economy burn, watching the Trump administration sever its longstanding ties with many of its allies. Why would they want to ruin Trump’s ratings by striking a deal? It’s not going to happen. Right, but wouldn’t that help his ratings if a deal happens and Trump can then prove to the entire world and to the American people, look, I did all this just so we can get a better, fairer trading deal? I don’t think the Chinese really want to help Trump.

I think he’s sort of painted himself into a corner. He’s promised all these deals with all these countries while insulting them on a daily basis. He’s not going to make any major deals.

The fact of the matter is that outside of China, other countries can’t really offer very much anyway because they don’t have large tariffs or even large non-tariff barriers against the US. The reason the US runs a trade deficit is because historically, the US has been seen as a great place in which to invest. Foreigners have often preferred to buy US assets rather than US goods.

The counterpart of that trade deficit has been a capital account surplus. So yes, I guess if Trump makes the US a very unattractive place to invest, people will dump US assets, they’ll dump dollars, the value of the dollar will fall, imports will become more expensive, exports will become cheaper, and we’ll end up with a lower trade deficit. That’s sort of what’s happening now, but it’s not really the solution to the underlying problem.

It probably isn’t an underlying problem that needs to be solved anyway. The US trade deficit is not really hurting the economy. The US already has something close to full employment.

We’ll come back to the labor market in the US in just a bit. This came in yesterday. This is interesting.

It’s not just the US imposing tariffs on China. It’s now China threatening countermeasures, says Fox Business, against countries that appease the US. So here it says China’s commerce ministry issued a warning in a statement on Monday in the latest round of rhetoric surrounding the trade war between the countries, the world’s two biggest economies.

China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner. China is determined and capable of safeguarding its own rights and interests.

What does this mean? So China is now looking at imposing countermeasures against countries that didn’t retaliate against Trump. Is that what that looks like? Yeah, I mean China doesn’t want other countries to gang up with the US against China. That’s not particularly surprising.

I think what’s often kind of forgotten here is that China has a long and painful history with Western intervention, stemming really from the early 19th century where foreign powers basically had their way with China. That memory hasn’t been lost. That kind of national humiliation that’s sort of deeply ingrained in the Chinese psyche, that’s still there.

And of course they’re going to fight back. They’re not going to acquiesce to Trump. There’s not going to be any sort of a trade deal.

The only thing that could happen potentially is that things will get so bad for Trump that he’ll have to walk back the tariffs that he already introduced. But I don’t really see the Chinese as giving in, giving Trump very much. So you think the US side will give in first? Yeah.

Well, I mean they’ll never characterize it that way. But I think Trump ultimately will be the one that backs down. Because unlike President Xi, who doesn’t have to worry about what happens in the midterms next year, Trump has to be concerned about that.

He has to be concerned that the Republicans will desert him. A lot of Republicans hate Trump. They’ll never say it in public.

But many prominent Republicans really don’t like the guy. If his popularity sinks further and it’s already decreasing, they’re going to basically stage a coup. They’re going to take away his authority to implement tariffs.

They have the legal right to do so. And we’re going to see massive infighting within the Republican Party. But Chinese are delighted to see all that.

They’re not going to stand in the way of that. Well, what does Trump really ultimately want with China? What is the endgame here? It’s not really clear. Trump has a zero-sum mentality when it comes to trade.

If China is running a trade surplus with the US, that means somehow the US is getting ripped off. That’s not the way most economists look at trade. Most economists look at trade as a positive-sum game.

Now, of course, there are losers from trade. And I think it’s correct to say that blue-collar workers in the manufacturing sector did lose out from the Chinese shock. But at the same time, trade with China generated a lot of cheaper goods that helped to support real incomes for those people who were going to shopping at Walmart and places like that.

And again, if you have a trade deficit, that’s a problem if there’s a lot of unemployment, because a trade deficit does subtract from demand. But what’s the rationale of trying to reduce a trade deficit if you already have full employment? All you’re going to do is shift labor from relatively high-cost, high-productivity parts of the economy to lower-cost, lower-productivity parts of the economy, stuff that’s currently done abroad. That’s not going to increase GDP.

That’s going to actually reduce GDP because you’re shifting labor from high-productivity sectors to lower-productivity sectors. It’s not sensible economic policy. Before we continue with the video, let me tell you about the importance of protecting your personal data privacy.

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Can you comment on this? Is this all just a way of getting a weaker dollar, which is what they wanted all along? Well, I mean, it depends on why the dollar is weakening. If the dollar is weakening because the Fed is cutting rates and monetary policy is getting easier, this is bringing down mortgage costs, yeah, that’s good. That’s certainly something that Besant or anyone else would want, but that’s not what’s happening now.

The dollar is weakening because foreigners are dumping dollars. Bond yields are going up, not down. The cost of taking out a mortgage is increasing, not decreasing.

So this is hardly the sort of economic outcome that anyone would rationally want. Is it interesting to you that bond yields in the U.S., the 10-year has gone up while the yields for other countries have gone down, but at the same time, the dollar is going down? I mean, the interest rate differential is on the side of the U.S., but the dollar is going down. How do you explain that? Oh, no, I spent the better part of my year at the International Monetary Fund covering emerging markets.

So we’re seeing now falling currency, rising yields, declining stock markets, capital outflows. It’s very reminiscent of many emerging markets. It’s not the way the U.S. is supposed to function.

I think there’s a number of reasons why bond yields haven’t fallen despite the fact that growth has slowed. One, that tariffs are going to raise inflation, and the Fed is worried about that. That’s restrained their ability to cut rates.

Two, there have been sort of positioning unwinds related to the basis trade and things like that that have kind of pushed up yields. Three, foreigners are kind of protesting U.S. political policy by diversifying away from dollars and U.S. treasuries. And then fourth, and this is, I think, potentially the big issue, the U.S. fiscal situation is really, really dire.

Like right now, the U.S. is spending about 3% of GDP just to service its debt. That’s a historic record. And if you look at the projections, that number is going to go from 3% of GDP to 6% of GDP over the next 10 years, even if the Trump administration doesn’t pass any further tax cuts, you know, no taxes on tips, Social Security over time, even if the Trump administration doesn’t cut taxes on that, as long as they extend the existing tax cuts, because bond yields are higher because spending on Medicare and Social Security will rise over time due to an aging population, that budget deficit is going to get larger, interest payments are going to get higher, and investors are finally waking up to that, and that’s preventing yields on treasuries from falling.

If you look at this chart, Peter, I have here the 10-year versus the U.S. dollar, and you see this divergence happening ever since the beginning of April, April 2nd, to be precise. Did you look at this as a trading opportunity and say, well, at some point, this divergence is going to converge, so either you long bonds because the 10-year is going to fall, or you long the dollar. Does that make sense to you? I think there’s probably a tactical trading opportunity coming when investors, I think, wake up to the reality that the U.S. is heading into a recession.

When that becomes evident, I think the Fed will have no choice but to start cutting rates aggressively, and then bond yields will decline. We’re not quite at that point yet. I think we’ll get there in the next few months.

There’s one data series that I would advise your viewers to track. It’s like initial unemployment claims. A lot of people in the market look at that as a good leading indicator for where the labor market is going.

If they start to rise, and they haven’t risen yet, but if they start to rise, that will be a telltale sign that the U.S. is entering a recession. At that point, you want to be long bonds, you want to be long duration, because the Fed will have to get much more aggressive in cutting rates, even if inflation is rising due to the tariffs. We’re not quite there yet, though.

All right. Well, let’s talk about the short end of the curve. By the way, this is the initial jobless claims.

We’ll leave that up. We’ll talk about this in a minute. But let’s talk about the short end of the curve, the two-year, which follows the Fed bonds rate.

Do you think the Fed will cut rates any time soon, meaning either by choice or by pressure? President Donald Trump just yesterday called a major loser on social media for not cutting rates any time sooner. He’s calling him Mr. Too Late, a major loser. I don’t know if you saw that, but anyway, is the FOMC going to succumb to pressure, you think? Mr. Too Late, with a two misspelled.

Yeah. I mean, I don’t think that’s going to sway Powell, if anything, it’s going to have the opposite effect. Just like Trump saying that other foreign leaders are calling up, kissing his ass, hoping to make trade deals.

That’s not going to incentivize anyone to make a deal with him. The Fed is going to do what the Fed is going to do. Until the economy is clearly entering a recession, the Fed is going to refrain from cutting rates.

Once the recession becomes inevitable, they’re going to cut rates aggressively. Of course, by then it’ll be too late. From that perspective, Trump is right.

Usually the Fed is too late in cutting rates. But this time, you can kind of excuse the Fed for not being too quick to cut rates. Inflation is going up because of the trade policies that the Trump administration has decided to enact.

It’s perfectly understandable. Okay. Well, let’s talk about initial claims now.

I have here a chart from the St. Louis Fed. If you just look at this chart, it’s been actually flat ever since the beginning of 2024. How are you interpreting this data series right now? The way I interpret that is saying that there hasn’t been that much firing so far.

Now, a couple of points. One, we have seen job openings start to decline based on some of the real-time indicators that I track from LinkUp, for example. This is an analytics firm.

They tally up the job openings posted by the 10,000 largest employers on their websites. Since mid-March, that number of job openings has declined pretty steeply. So that’s probably an indication that hiring is coming down from already fairly low levels, which means that if you have a job, if you’re lucky enough to hold it, you’re fine.

But if you lose a job, it’s becoming increasingly difficult to find work. So I think it’s just a matter of time until we start to see those claims numbers rise. Another point is that if you look at layoff announcements, which do tend to be a somewhat leading indicator for initial claims, they have been ticking higher, even outside of government work.

Well, here’s the Atlanta Fed GDP Now tracker, which is still in negative territory after almost two months now, Peter, hasn’t gone back up to above zero. First of all, do you agree with this forecast? And second, if you do, what’s going to happen to claims, initial claims, once we actually do get a recession? Well, I mean, their number is probably a little bit too low. If you look at the New York Fed’s model, it’s pointing to much healthier growth.

Consensus, if I recall, is around 1% or so. So I think the general view is that growth has slowed in the first quarter, not to the extent that the Atlanta Fed might argue using its model. But it’s certainly true that if growth has slowed in Q1, because employment has continued to grow reasonably well, then productivity must have declined in Q1.

And often when that happens, firms then have to sort of turn around and start laying off workers. So I suspect, again, we’re going to see a much more difficult labor market in the second quarter and into the third quarter of this year, and most likely a recession that starts by the summer. Is your analysis predicated on the trade war escalating or are you removing that completely? Let’s say if we didn’t have any sort of trade war, would you still make the same call? I would, but with not the same level of conviction.

I mean, it’s worth remembering that even before the trade war began, we already were seeing some signs of weakening in the economy. Consumer spending was slowing. As I mentioned, those job openings were falling.

Delinquency rates on credit cards, auto loans were rising. The inventory of newly built unsold homes was increasing pretty rapidly. In fact, it’s back to where it was in late 2009.

So there’s a lot of excess new homes now, especially in states such as Florida and Texas. So all of that was weighing on the economy even before the trade war began. In general, my view is that recessions happen when economies are vulnerable and then get hit by shocks.

Well, I think the economy actually was vulnerable going into this year and now it’s been hit by a major trade shock, which makes the recession very, very likely. Well, how would you evaluate the M2 money supply going up and the money velocity continuing to go up? Well, it’s been kind of plateauing, the slope that is, but it’s still on an upward trajectory. Do you think liquidity is increasing in the system? Thus, perhaps alleviating any sort of economic slowdown? I mean, M2 largely captures bank deposits.

So income growth is slowing, but it’s still positive and people are saving a bit more now. The savings rate has ticked higher, but that’s not necessarily a good thing. It means that people increasingly are worried about the future and want to increase their precautionary savings.

OK, something else that we’re following, if we just look at the markets with gold going up to now above thirty four hundred dollars, Bitcoin has been rising actually alongside gold kind of decoupling from stocks. What do you think the market is signaling? I mean, economic indicators aside, what are what are what are markets anticipating in terms of economic growth? Well, I mean, keep in mind that we always cite the price of gold in dollars and Bitcoin in dollars. Sure.

If you were to express those in like euros, the increase in prices aren’t nearly as impressive. So part of this is just like a weaker dollar story. But the fact that the dollar has weakened, remember, the dollar historically has been a counter cyclical currency, usually strengthens when times are tough.

It doesn’t weaken. Think about 2008. The dollar soared during the global financial crisis, even though it originated in the US dollar soared during the worst point of covid.

The fact that the dollar is weakening now is telling you something important. It’s telling you that investors increasingly don’t see the dollar as a safe haven asset. And that’s the problem.

That’s a problem because the treasury market is the glue that holds the global financial system together. If people lose faith in the dollar and treasuries, then they’re losing faith in what kind of binds the global economy. Treasuries are the collateral that’s used in so many financial transactions.

They’re the asset that is used to price risk. If all of a sudden treasuries become risky, the dollar becomes risky. That’s really bad news.

Is the DXY historically a leading indicator for consumer prices domestically, meaning let’s say the DXY, which is the dollar versus a basket of other currencies around the world, if it goes down, which it has been throughout 2025, is that necessarily going to translate to higher consumer prices domestically? Not really. I mean, the US is a fairly closed economy. The correlation between the value of the dollar inflation is fairly small.

Of course, at the margin, a weaker dollar does raise import prices. And of course, if imports are being taxed, tariffed, that’s going to push up import prices even more. So it is inflationary from that perspective.

But ultimately, what kind of drives US inflation is whether the economy is overheated or not. So we could end up in a bit of a stagflationary situation later this year where inflation temporarily rises, but unemployment is increasing, growth is below trend. It’s not really a good environment for our stock market investors.

Well, then let’s finish off on your investment strategy here, given your macro thesis. Well, first, can you give us your S&P 500 year end outlook? So it hasn’t changed. It was 44.50 going into this year, remains 44.50. I mean, other strategists, there’s about 25 strategists who are surveyed by Bloomberg.

I was by far the lowest in that list in terms of end of year targets. Others have sort of moved a little bit closer to me, but I’m still at the bottom of that ladder. The thing is like 44.50 isn’t really that bearish.

To get to 44.50, all you would really need is for the P multiple in the stock market, the forward P multiple based on expected earnings to go down to around 18. And for earnings estimates to be cut by, say, 10% from current levels. Neither of those two assumptions is that outlandish.

Remember, between 2015 and 2019, the S&P traded at 16.8. So I’m talking about a P multiple of 18 in a recessionary context when back then we didn’t even have a recession. Likewise, a 10% decline in earnings estimates. Earnings estimates haven’t even fallen yet.

They’re going to fall as analysts mark down their numbers. 10% is also fairly mild. Usually it’s closer to 20%, if not more, during recession.

So even though I’ve got the lowest price target, arguably it’s still too optimistic. I’m actually a little bit surprised, Peter, that you haven’t revised your forecast downward, given that I think you gave me this forecast last year before Trump officially announced his reciprocal tariffs and escalated the trade war. Were you pricing that in already last year in your forecast? Yeah, I mean, if you read our annual outlook, we predicted a major trade war.

And I have to say, like, the trade war has been even bigger than I thought it would be. But we also predicted, I think this is sort of coming to pass, real problems in the bond market with yields not going down in the way that people expected and the prospect of more unfunded tax cuts potentially causing yields to rise further. That was also part of our forecast.

I think that is still playing out. And that hasn’t that issue, I think, hasn’t been resolved yet, nor will it be resolved anytime soon. So in terms of asset allocation, I’m guessing you’re more defensive now.

How are you playing this? Yeah, I mean, we’re underweight stocks, overweight cash, neutral in duration for now. As I said, we might go overweight duration at some point, but I want to see clear evidence that we’re entering a recession first. We’ve liked gold, continue to like gold.

It’s expensive, but it’s got a lot of great tailwinds behind it. To the extent that you have to be in stocks, I would recommend favoring the more defensive sectors, consumer staples, health care, utilities over the more cyclical sectors. Commodities, is that is that part of the cyclical outlook or strategy here? Is commodities a bearish play for you? Or not so much oil and metal and the industrial metals? Yes, that’s that’s a bearish play.

Gold is a bullish play. How are you interpreting treasuries and T-bills in this analysis? Are you are you? Treasuries didn’t do well in the last couple of weeks because of bond yields rising, which surprised a lot of people. But basically, our treasury is still a safe haven asset.

Not to the extent that they were in the past, and I think it’ll take a while for kind of the fiscal credibility of the US to return. Certainly running a budget deficit of six and a half percent of GDP at a time when unemployment is still low doesn’t help treasuries at the long end. So to the extent that you have to be in treasuries, I would recommend being more in T-bills rather than T-bonds.

Again, at some point, we’re going to have the Fed cutting rates. At that point, you would expect longer term bond yields to decline. We’re not quite there yet, however.

And finally, gold and Bitcoin, some argue, are the anti-dollar assets. You even alluded to why they’re going up early in the interview because of dollars down. Would you be holding gold and Bitcoin right now? Gold, yes.

Bitcoin, I think it’s a little bit more difficult just because Bitcoin has safe haven properties these days, but also has kind of a risk component. A lot of people are speculating on crypto and if overall appetite for risk and speculation goes away, that could drag down Bitcoin like it has some of the other crypto plays, which have done much worse than Bitcoin. All right.

Well, very good. Thank you very much, Peter. Where can we follow your work? I’m on Twitter, or X as it’s called now.

I’m on LinkedIn. And of course, please go to BCAResearch.com. If you don’t receive our research, please fill in the form to see if you can get on trial. Yeah, great research.

I know because I used to work there. Thanks very much, Peter. Appreciate your time.

We’ll speak to you soon and take care for now. Thank you. Thank you for watching.

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