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US Economy Faces Risks of Decline If Trump Imprisoned, Former Adviser Warns

 May 11, 2024

A recent downturn in the U.S. stock market and slow GDP growth have sparked concerns about the nation's economic future.

The economic apprehensions are compounded by the legal challenges facing former President Donald Trump, raising fears about potential market instability among some should he be convicted, as Fox Business reports.

The first quarter of this year witnessed a sluggish economic pace, with the U.S. GDP increasing by only 1.6% on an annualized basis. This growth was the slowest observed in two years, falling short of the anticipated 2.4% forecast by LSEG economists.

Stock Market Reacts Negatively To Economic Data

In reaction to the disappointing GDP data, major stock indices including the Dow Jones Industrial Average took a hit, dropping over 375 points. Both the S&P 500 and Nasdaq Composite followed suit, ending the day lower.

This downturn in the stock market was accompanied by a rise in bond yields, with the yield on the 10-year Treasury bond climbing to 4.076%, a level not seen since the previous November.

Amid these economic turbulences, former President Donald Trump found himself in a New York City courtroom. Trump is facing charges related to alleged hush money payments, an issue that has added another layer of uncertainty to the financial landscape.

Legal Troubles For Trump Stir Market Concerns

During the court proceedings, Trump's defense team requested a mistrial based on Stormy Daniels’ testimony, a request that the judge denied. This legal battle is viewed by some as a critical risk to the economy.

Kevin Hassett, a former White House economic adviser, has been vocal about the potential repercussions of Trump's legal predicaments on the economy. Hassett expressed deep concerns over the judge's decisions, which he described as "undemocratic" and "unconstitutional."

Hassett suggested that these legal issues might lead to an economic scenario reminiscent of a "banana republic," particularly if Trump were to be imprisoned.

Economic Forecast Darkens With Political Drama

“And if President Trump is in chains, going to Rikers Island, then would you want to buy a U.S. Treasury the next day?” Hassett questioned, highlighting the potential immediate impact on investor confidence.

He further elaborated on the gravity of the situation, indicating that such an event could lead to one of the "bigger market effects" ever seen. According to Hassett, the resulting economic shock could see Treasury yields skyrocket while equities tumble significantly.

“Yields go way, way up and equities go way, way down. If you're a Swiss investor and you're thinking, ‘should I buy a U.S. bond?’ And you see Trump going to Rikers on ridiculous charges, right? Then you're not going to want to buy the bonds,” he explained.

Potential Long-Term Impacts On U.S. Investments

The dialogue surrounding the former president's trial and its impact on the U.S. economy highlights significant concerns among investors and policymakers alike.

The interplay between Trump's legal issues and economic indicators such as GDP growth rates and stock market performance is creating a complex scenario for economic forecasting.

Market analysts and economists are closely monitoring these developments, trying to predict the long-term effects on both domestic and international financial markets.

Conclusion: Economic Stability In Question

To summarize, the U.S. economy is currently navigating through a period of slow growth, compounded by significant market reactions to both economic data and the unfolding legal drama involving former President Donald Trump.

Kevin Hassett's warnings about the potential risks to the financial market paint a grim picture of the future if Trump were to be incarcerated. The ongoing situation poses a critical juncture for the U.S. economy, with possible long-term ramifications for global financial stability.