US recession: ‘They’re playing with nitroglycerin’, Ed Yardeni on new Treasury Secy Bessent

Ed Yardeni, President of Yardeni Research, has issued a stark warning about the economic risks facing the US, describing the situation as “messing around with nitroglycerin.””This is very dangerous to basically tell people that the administration doesn’t care very much if we have a recession, because the short-term pain is going to be for long-term gain. Nobody believes it until they see it. And Americans voted for a President that they thought would make things better, and they are not that patient, so it could be an issue for the midterm elections,” Yardeni said.

His remarks come in response to comments from new US Treasury Secretary Scott Bessent, who, in an interview on NBC’s ‘Meet the Press’ over the weekend,  acknowledged that there are “no guarantees” the US can avoid a recession.

Also Read | Market correction not a bear phase: Envision’s Nilesh ShahHowever, Bessent dismissed the possibility of a financial crisis and downplayed concerns over recent stock market declines, calling corrections ‘healthy.’ He added that markets ‘will do great’ if the administration implements strong tax policies, deregulation, and energy security.
Despite Bessent’s assurances, Yardeni remains skeptical, warning that current policies may not be enough to prevent a financial crisis. “if we have a crisis, it is going to be related to the extreme amount of debt relative to gross domestic product (GDP) in the United States.” Although short-term fixes have delayed major economic problems, the long-term debt issue remains unresolved,” Yardeni said.Yardeni also noted that market sentiment remains fragile, and a bottom has not yet formed. Typically, extreme pessimism signals a market bottom, but this time is different because the US Federal Reserve is not stepping in with rate cuts.

“We have very high bearishness sentiment indicators for the stock market, and that usually makes a low. The reason it makes a low is because, coincident with people getting extremely pessimistic, is that the Federal Reserve recognises there is a problem and comes in. And we get easing by the Fed. This time around, the Fed has indicated quite explicitly, they are in no hurry to lower interest rates,” he noted.

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For the full interview, watch the accompanying video

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