It’s the debt, stupid!

US equities are being driven by purely domestic investment flows — rejoicing over Trump’s MAGA policies is understandable. But it ignores an enormous, dangerous elephant in the room: debt!

History is littered with well-meaning attempts to correct an accumulation of past economic errors. The script goes like this. Common sense tells us we are heading for a crisis, unless there’s a change in economic and political philosophy. For years, we have been talking about the need for a great policy reset. There are two paths to follow: either try force the pace on change to prevent an obvious crisis which damages everyone, or to take the view that fundamental political reform can only occur after current policies have completely failed.

Essentially, Trump is a patriot trying to steer the US economy back from the brink. But he is an isolationist in a commercially integrated world, and he relies on foreigners to fund his policies. We have to look at Trumpenomics from their point of view. How do they read consumer price inflation, in the wake of extra trade tariffs? How do they read the stimulus of income and corporate tax cuts? How is it all going to be paid for?

The answer to these questions is being revealed in the chart below: