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As I clearly wrote and predicted late last year market discipline would punish swiftly and sharply Trump’s policies that - like high tariffs - cause higher inflation and lower growth. Indeed, both bond and stock vigilantes woke up over the weekend as Trump unleashed high tariff ls against Canada, Mexico and China: stock futures are sharply down (-2.5% for the Nasdaq) while initially long rates rose; the slight retracing in bond yield on Sunday is driven by a safe haven bid as stocks are crashing. But over time tariffs that increase inflation will lead to higher yields as inflation and its expectations rise unless the tariff shock slows down growth so sharply that recession probabilities rise. We will now see if Trump economic advisors - such as Bessent - have influence and are willing and able to put some reason in Trump’s mind and force him to partly relent over dangerous and front-loaded policies that are stagflationary. Or whether Trump - like emperor Nero - will stubbornly double down and burn Rome - ie DC and America and the world- to the ground. I also argued that in due time market discipline should restraint his worst Stagflationary instincts as otherwise both asset prices and the real economy will crash much more. We shall see in the next few months if I am correct also on that second prediction… The Good, the Bad, and the Uncertainty of the Trump Economy, Dec 31, 2024 by NOURIEL ROUBINI https://t.co/bwHfp23Apc