The US could be headed towards a financial crisis similar to Britain’s 2022 “mini-budget” debacle under former Prime Minister Liz Truss, as Donald Trump’s presidential plans unfold, according to Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisory and asset management organizations.
Set to take office in January, Trump has proposed sweeping economic reforms that include deep tax cuts, protectionist trade policies, and deregulation aimed at boosting corporate growth. However, experts are raising alarms that these measures could destabilize financial markets and stoke inflationary pressures.
Green draws stark parallels between Trump’s economic agenda and the UK’s ill-fated mini-budget, which caused a sharp sell-off in British bonds and a drastic devaluation of the pound, forcing the Bank of England to intervene. “An aggressive fiscal strategy coupled with waning confidence from international investors could trigger a similar crisis in the US,” Green warns, noting the potential for a sharp depreciation of the dollar and turmoil in global markets.
One significant concern is the impact of Trump’s proposed tariffs and government spending, which are seen as catalysts for inflation. Green highlights that foreign investors, crucial buyers of US Treasury bonds, are already diversifying away from the dollar due to concerns over inflation, high debt levels, and geopolitical risks. This shift is putting upward pressure on yields and further destabilizing the financial system.
The risk of renewed inflation is central to these concerns. Trump’s policies could drive up consumer prices, compelling the Federal Reserve to adopt a more aggressive interest rate stance, which could exacerbate volatility in the bond market and further undermine investor confidence.
While the crisis has not yet materialized, Green warns that the risk is escalating as markets consider the potential fallout from prolonged inflation and increasing debt burdens. “The dollar’s relative strength could quickly erode if Trump’s economic agenda destabilizes the global financial system,” he cautions.
Green also points to the UK’s experience in 2022 as a cautionary tale. “Britain’s government was forced to reverse its tax cuts within weeks as bond yields spiked and confidence evaporated. A similar miscalculation in the US could lead to a Treasury sell-off and threaten the stability of the world’s largest economy,” he explains.
As the risks grow, Green advises investors to take proactive steps to protect their portfolios. “Opportunities to reposition portfolios, hedge risks, and benefit from market dislocations will arise for those prepared to act decisively,” he concludes.