economic Data: A Mixed Bag

The U.S. economy presents a complex picture. Initial data sparked concerns, but recent indicators offer a more optimistic view.

• Q1 Contraction: Growth in the first quarter surprised economists with a contraction,initially fueling recession fears.
• PMI Recovery: At least the purchasing managers’ indices have recovered after the slump at the beginning of the year and are back in agreeable expansionary territory in May, both for the manufacturing and service sectors.

Tariffs: A Delayed Threat

While immediate recession fears have subsided, the impact of tariffs remains a important concern. The effects may not be promptly apparent due to a temporary suspension.

Our economists have always assumed that a recession in the US can be avoided. In addition,the market has already scaled back its recession fears based on the still solid US data of recent weeks and months. Nevertheless, the effects of the tariffs are likely to become visible in the second half of the year, partly due to the 90-day suspension. So the problem has not been solved,but merely put on the back burner.

The 90-day suspension mentioned refers to a temporary pause in the implementation of certain tariffs, providing a short-term reprieve but not eliminating the underlying economic risk.

budget Deficit: A Growing Burden

A significant threat to the dollar stems from the U.S. budget. Tax policies are exacerbating the problem.

• tax Bill: Trump’s tax bill, which has been controversially debated even within his own party, has been passed by the House of Representatives and is now going to the Senate.
• Permanent Tax Cuts: The bill aims to make the tax cuts introduced permanent.
• Financing Issues: However, the financing for this is also shaky, and it can be assumed that the budget deficit will continue to swell.

Market Awareness: A Waiting Game

The market’s reaction to the budget situation is a key factor to watch.

perhaps the issue will now become more pressing as it is being discussed more in public. I am curious to see when the market will realize that this is the next major (structural) burden on the dollar.

Increased public discussion and awareness could prompt investors to reassess their positions, potentially leading to a decline in the dollar’s value.

frequently Asked questions

Will the U.S. enter a recession?

Economists generally believe a recession can be avoided, but the impact of tariffs remains a concern.

What is the biggest threat to the dollar?

The growing U.S. budget deficit poses a significant risk to the dollar’s stability.

When will the market react to the budget deficit?

It is uncertain when the market will fully recognize the budget deficit as a major burden on the dollar.