Please note: it is easy to feel the temptation for any discussion to creep into political debate, but please remember the forum's rules. No politics.

You're welcome to discuss markets and trading-related approaches to this, in fact I would encourage it.

Quoting 

Traders are starting to price in the possibility that the U.S. economy might fall into a recession — and one Wall Street veteran says that might actually be the Trump’s administration’s plan. Charlie McElligott, a strategist at Nomura dubbed Wall Street’s most wired analyst by the Financial Times for his manic missives focused on the options market, laid out the argument in a note to clients. He said the Trump administration needs an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda. Rate-cut expectations are increasing, and the U.S. dollar index (DXY -0.63%) has dropped 4% from its highs of early January, while Democrat Joe Biden remained in the White House. The yield on the monetary-policy-sensitive 2-year Treasury (TMUBMUSD02Y 3.970%) has dropped 44 basis points from its January highs.

https://www.marketwatch.com/story/is-the-white-house-trying-to-engineer-a-recession-this-wall-street-pro-explains-the-vision-fb3b4106

@xplorer

I will give a try, and only a try, with the following answer/comment/conclusion:

While McElligott’s argument is intriguing, it is speculative and lacks direct evidence. The idea that the Trump administration would intentionally engineer a recession seems politically and economically untenable, given the significant risks involved. However, the broader points about the potential benefits of a weaker dollar, disinflation, and Fed rate cuts are valid considerations in economic policy discussions.

The market movements (e.g., falling Treasury yields, a weaker dollar) likely reflect broader concerns about the economic outlook rather than a deliberate strategy by the administration. Traders and analysts are often quick to connect dots, but the reality is usually more complex and less conspiratorial than such theories suggest.

Symple

Thanks Symple, I appreciate the post.

Symple 

While McElligott’s argument is intriguing, it is speculative and lacks direct evidence.

Wouldn't you say though that most, if not all, financial analysis is speculative? At the end of the day the market either goes up or down so all analysts have a 50% chance of being right

xplorer 

Thanks Symple, I appreciate the post. Wouldn't you say though that most, if not all, financial analysis is speculative? At the end of the day the market either goes up or down so all analysts have a 50% chance of being right

@xplorer

Following just some thoughts on your "50% chance of being right":

The goal of financial analysis isn’t just to predict whether the market will go up or down. It’s also about understanding the drivers of market movements, assessing risks, and identifying opportunities (beside other topics like "Information Edge", "Risk Management" or "Time Horizon", just to mention a few).

While it might seem like analysts have a 50% chance of being right, the reality is that their predictions are often more nuanced. For example:

An analyst might predict a 60% chance of a market rally and a 40% chance of a decline. If the rally happens, they were “right,” but their prediction still acknowledged significant uncertainty.

While financial analysis is inherently speculative and markets can seem like a coin flip at times, the best analysts go beyond simple binary predictions. They provide insights into the drivers of market movements and assess risks. While no one can predict the future with certainty, good analysis can tilt the odds in your favor—even if it’s not a perfect 50/50 game.

My answer may is a bit provocative, I guess it still gives some specific inside of good analyst.

Symple

thanks @Symple and not to worry, it was me who was being facetious. Of course analysts do more than just say "market will go up/down"

First I don't think this conversation can go very far without it getting political! We will see.

I'm not sure about Europe or the World in general, but in the US I do not believe there is willingness to take short term pain for long term gain. I mean that from the perspective of politicians and the voting public.

I would add that i think it's possible both Charlie McElligott and @Symple are both right. Personally I think @Symple response was excellent.

Regarding the "50% chance of being right" and analysts predictions, semantics become important.. If I look at the Fed Funds Futures (ZQ) the Z25 contract closed at 96.35 last night which implies a Fed Funds rate of 3.65% in December. Current rate is 4.33%. So I think it is easy to say with high confidence that the Fed Funds Rate will be lower than today in December! But it is probably 50/50 as to whether is above or below 3.65%!

SMCJB 

Regarding the "50% chance of being right" and analysts predictions, semantics become important.. If I look at the Fed Funds Futures (ZQ) the Z25 contract closed at 96.35 last night which implies a Fed Funds rate of 3.65% in December. Current rate is 4.33%. So I think it is easy to say with high confidence that the Fed Funds Rate will be lower than today in December! But it is probably 50/50 as to whether is above or below 3.65%!

The above is why I hope we can limit the discussion to economics and behaviour of asset classes.

@xplorer

I will now try to formulate an expanded approach to this topic in a thesis to continue the discussion here without going too far into politics:

As already mentioned: “The recent market movements—such as falling Treasury yields and a weaker U.S. dollar—are primarily driven by broader concerns about the economic outlook, including fears of a potential recession, slowing global growth, and shifting monetary policy expectations. These trends reflect investor sentiment and macroeconomic forces rather than a deliberate strategy by the administration”.

However: The administration’s focus on rising tariffs adds another layer of influence, particularly on specific industries and the overall economic environment.

Rising tariffs are designed to protect and boost certain domestic industries (e.g., steel, manufacturing, agriculture) by reducing foreign competition and encouraging domestic production. These industries may see short-term gains from reduced imports and increased demand for their products. Nevertheless, tariffs also come with trade-offs: they can increase costs for businesses that rely on imported goods, lead to higher prices for consumers, and potentially slow economic growth. These effects can amplify broader market concerns about inflation and economic slowdown, further influencing investor behavior.

In this scenario, the market movements (e.g., falling Treasury yields, a weaker dollar) are still largely driven by macroeconomic factors, but rising tariffs play a significant role in shaping sector-specific outcomes and contributing to the overall economic narrative. For example:

• Falling Treasury Yields: Investors may be pricing in slower economic growth due to the potential drag on trade and higher costs caused by tariffs.
• Weaker U.S. Dollar: Tariffs can disrupt global trade flows and reduce demand for the dollar, contributing to its decline. A weaker dollar, in turn, can benefit U.S. exporters but may also increase inflationary pressures.

Now who could be the winners (industries protected from foreign competition) and losers (industries reliant on imports or global supply chains)?

As this is mainly a forum about “Future trading”, main winners here in this scenario should be:

• Commodities:

o Steel Futures (e.g., HRC Steel Futures on the CME)
o Aluminum Futures (e.g., Aluminum Futures on the LME)

• Agricultural Commodities:
o Corn Futures (ZC) or Soybean Futures (ZS) (if tariffs protect U.S. farmers)

• Equity Index Futures:
o S&P 500 Sector Futures (e.g., Industrial or Materials sectors, which include steel and manufacturing companies)

The main looser could be:

• Equity Index Futures:
o Nasdaq-100 Futures (NQ) (heavily weighted toward tech companies hurt by tariffs)
o S&P 500 Consumer Discretionary Sector Futures (includes retail and automotive companies)

• Currency Futures:
o U.S. Dollar Index Futures (DX) (a weaker dollar could be a trend to trade)

Broader Market Trends:

• Interest Rate Futures:
o 10-Year Treasury Note Futures (ZN) or 2-Year Treasury Note Futures (ZT) (to trade falling yields)

• Commodities:
o Gold Futures (GC) or Silver Futures (SI) (as hedges against inflation or recession)

• Energy Futures:
o Crude Oil Futures (CL) (if tariffs disrupt global trade and energy markets)

Symple

Related to this discussion, i created this optimized prompt if anyone would like to explore what an AI tool can generate:

Optimized Prompt: Impact of U.S. Tariffs on Futures Market Trading Strategies
---
Act as a futures market strategist with expertise in macroeconomics and trade policies. Your objective is to analyze the impact of tariffs imposed by the U.S. White House administration on the futures markets, highlighting both direct and indirect consequences. The focus should be on how traders can adjust their strategies in response to these policies.

Context & Objective:
I want to understand how U.S. tariffs affect futures markets across different asset classes (equities, commodities, currencies, interest rates). The analysis should include the key economic dynamics, market reactions, and trading strategies that futures traders can use to manage risk and capitalize on market movements.

Expected Content & Structure:

1️) Direct Impact of Tariffs on Futures Markets
Equity Index Futures (ES, NQ, YM, RTY):

How tariffs influence corporate earnings expectations and volatility in major U.S. indices.
Historical examples of tariff-driven stock market reactions.
Commodity Futures (CL, GC, ZS, ZC, HE, LE):

How tariffs affect demand/supply in crude oil, gold, agriculture (soybeans, corn), and livestock markets.
China’s response to U.S. tariffs and its effect on global commodity prices.
Currency Futures (6E, 6J, DXY):

The relationship between tariffs and USD strength/weakness.
Emerging market currencies under tariff stress.
Interest Rate Futures (ZN, ZB, ZQ, GE):

Federal Reserve policy adjustments due to inflationary or deflationary effects of tariffs.
How yield curve shifts impact bond futures trading.

2️) Indirect Market Consequences
Risk-on vs. Risk-off Sentiment: How tariffs drive capital flow between assets (equities vs. bonds vs. commodities).
Supply Chain Disruptions & Cost Pass-through Effects on Inflation.
Impact of Retaliatory Tariffs on Global Futures Markets (DAX, Nikkei, HS50, FTSE).

3️) Futures Trading Strategies for Tariff-Induced Market Movements
Short-term (Day Trading/Scalping):
Volatility breakout strategies for equity index futures (ES, NQ, YM).
Using VIX futures (VX) as a hedge against uncertainty.

Medium-Term (Swing Trading):
Spread trading strategies in commodities (e.g., soybean crush spreads).

Trading currency futures based on tariff-related USD strength/weakness.

Long-Term (Position Trading):
Macro-driven futures positioning based on Fed policy shifts.
Using gold and bonds as safe-haven assets in case of prolonged trade uncertainty.

4️) Practical Recommendations & Case Studies
Historical Analysis: Review past U.S.-China tariff cycles and their impact on futures markets.
Data & Charts: Key market movements from prior tariff events (2018-2019 trade war).
Scenario Planning: If tariffs are increased, what futures contracts might benefit or decline?

Preferred Tone & Style:
Technical, data-driven, and trading-focused, tailored for futures traders who need actionable insights.

Constraints & Enhancements:
Ensure analysis is backed by historical data and past tariff case studies.
Highlight key indicators, reports, and economic events traders should monitor.
Provide realistic trade setups based on different possible market reactions.

Found this somewhere, read it with a pinch of salt of course.