A cinematic sequel to "Clash of the Titans" could play out on Wall Street in 2025. This epic struggle, mirroring the battles between Zeus and Hades in Greek mythology, may pit the stock market against the bond market when determining which forces will be unleashed on the U.S. economy in the months and years ahead. In the wake of President-elect Donald Trump's Nov. 5th victory, the stock and bond markets have had decidedly different reactions to the news.
Many economists and the bond market fear the imposition of broad – rather than targeted – tariffs are inherently inflationary. They would lift the cost of goods and services for just about every American family. Mass deportations could be both inflationary and recessionary – or to put it another way, stagflationary. This move would shrink the available labor pool and drive up wages, while also reducing the consumer base. This would reduce not just consumption, but also, federal tax revenues.