Connect with us

Economics

Truth Social is a mind-bending win for Donald Trump

Published

on

Since shares in Donald Trump’s media firm began trading publicly on March 26th, their value has slid by more than half, prompting headlines, and some crowing from the left, about the decline. Which still seems less newsworthy than that anyone is buying at all: even at roughly $26 per share, investors are prizing Mr Trump’s social-media platform, Truth Social, at a heroic value relative to its performance or apparent potential.

One must write “roughly” $26 per share because even the Wall Street Journal has struggled to ascertain just how many shares are outstanding. Other possible red flags for investors include the company’s independent auditor reported on March 25th that its “operating losses raise substantial doubt about its ability to continue as a going concern”. After forecasting sales of $144m for 2023, Truth Social delivered just $4.1m, and a loss of $58.2m.

Truth Social says it is contending with such entrenched giants as Facebook and Amazon, but it does not disclose its audience numbers. In a regulatory filing it tried to make a virtue of this by arguing that “adhering to traditional key performance indicators” such as traffic or advertising results—the sorts of results that typically obsess media investors—could “potentially divert its focus from strategic evaluation” of its business. For March, the analytics firm Similarweb found Truth Social had about 7.7m unique visitors, or roughly 0.05% of Facebook’s traffic.

Maybe such realities will suddenly drag down the stock. But it has a long way to fall to depart the reaches of faith for the realm of reason. John Rekenthaler, a vice-president of Morningstar, an investment research firm, has estimated that if people valued Truth Social as they did the initial offerings of such firms as Tesla, Google and Facebook, the shares would be selling for 50 cents.

Investors in Truth Social, compared with those in other startups, are clearly not relying upon the same sort of analysis or even indulging the same sort of dream. They are not even playing the same game as the very online investors who drove up such meme stocks as AMC and GameStop to irrational valuations that were also relative fractions of the paper value of Mr Trump’s company.

Something else is happening here, a tremor in market logic, even a rupture with common sense. Maybe investors believe that Mr Trump will win in November and, as the first president with his own social platform, insist on making all his pronouncements upon it. Maybe they adore him and want to multiply his billions. Whatever their motives, the performance of Mr Trump’s stock so far represents the purest demonstration of his power not just to bend reality, but to convert illusion into reality—and also, maybe, of how Americans are coming to confuse the two.

For years Mr Trump has used his mastery of the virtual world—the controversy and excitement he generates online—to increase his political power. He has just 7m followers on Truth Social, compared with 87m followers on X. But by taking ownership himself of the virtual events he is so skilled at provoking, he has created tremendous paper value, and he appears to be on his way to turning that virtual value into real wealth. Mr Trump holds 78.8m shares in the company, or about 57% of the total, and he is due to receive 36m more if the share price stays above $17.50 until late April. Under a “lockup” agreement Mr Trump cannot sell for six months, until September 25th, unless the company’s board releases him from the restriction.

What Mr Trump has called “truthful hyperbole”, and others call lying, has been central to his success. When he built Trump Tower it had 58 floors, but in numbering them he skipped ten to claim 68 instead. This tactic has occasionally caught up with him, most severely in the $355m penalty imposed on him in February after a New York judge found Mr Trump had lied for years to secure loans and make deals—trebling the size of his penthouse apartment, for example, and valuing his Mar-a-Lago estate in Florida based on its potential for residential development, though he had surrendered the rights to develop it as anything but a club.

Yet Mr Trump’s trademark hyperbole is the very foundation of Truth Social. Its value rests on his participation—his agreement with the company constrains his posting elsewhere—and his posts are full of exaggerations if not lies, whether about the criminal cases against him, President Joe Biden, or the state of the country. Is that some sort of fraud? Or is it just life online, and how value is best created there, to be exchanged for an offline currency via advertising, the stockmarket or the ballot box?

There is no spoon

Virtual reality always seems to be a step away. Alternative digital worlds like “Second Life” have not caught on, and clunky AR headsets have proved more aversive than immersive. But Americans may not recognise the degree to which reality online—a reality that did not exist for most just a generation ago—has washed back into the real world, distorting their politics, their relationships, their apprehension of what is true or what has value. The rules governing all of this have changed, and it is not clear what the new rules are. Mr Trump and others are still inventing them.

Officials in the administration of President George W. Bush used to deride what they called the “reality-based community” and insist they could “create our own reality”. They were pikers compared with Mr Trump. It seemed like a joke, during his campaign for president in 2016, when he referred to his political following as a “movement”. Now it is reasonable to call him the most consequential figure in American politics since Ronald Reagan. Maybe Mr Trump will lose the election in November, and maybe that will cause stock in Truth Social to crash, if it does not collapse before then. But it does not seem like a crazy act to buy a few shares now, just in case. 

Read more from Lexington, our columnist on American politics:
Are American progressives making themselves sad? (Apr 4th)
The case of Stormy Daniels echoes past scandals (Mar 27th)
Binyamin Netanyahu is alienating Israel’s best friends (Mar 18th)

Also: How the Lexington column got its name

Economics

German inflation, March 2025

Published

on

Customers shop for fresh fruits and vegetables in a supermarket in Munich, Germany, on March 8, 2025.

Michael Nguyen | Nurphoto | Getty Images

German inflation came in at a lower-than-expected 2.3% in March, preliminary data from the country’s statistics office Destatis showed Monday.

It compares to February’s 2.6% print, which was revised lower from a preliminary reading, and a poll of Reuters economists who had been expecting inflation to come in at 2.4% The print is harmonized across the euro area for comparability. 

On a monthly basis, harmonized inflation rose 0.4%. Core inflation, which excludes food and energy costs, came in at 2.5%, below February’s 2.7% reading.

Meanwhile services inflation, which had long been sticky, also eased to 3.4% in March, from 3.8% in the previous month.

The data comes at a critical time for the German economy as U.S. President Donald Trump’s tariffs loom and fiscal and economic policy shifts at home could be imminent.

Trade is a key pillar for the German economy, making it more vulnerable to the uncertainty and quickly changing developments currently dominating global trade policy. A slew of levies from the U.S. are set to come into force this week, including 25% tariffs on imported cars — a sector that is key to Germany’s economy. The country’s political leaders and car industry heavyweights have slammed Trump’s plans.

Meanwhile Germany’s political parties are working to establish a new coalition government following the results of the February 2025 federal election. Negotiations are underway between the Christian Democratic Union, alongside its sister party the Christian Social Union, and the Social Democratic Union.

While various points of contention appear to remain between the parties, their talks have already yielded some results. Earlier this month, Germany’s lawmakers voted in favor of a major fiscal package, which included amendments to long-standing debt rules to allow for higher defense spending and a 500-billion-euro ($541 billion) infrastructure fund.

This is a breaking news story, please check back for updates.

Continue Reading

Economics

First-quarter GDP growth will be just 0.3% as tariffs stoke stagflation conditions, says CNBC survey

Published

on

U.S. President Donald Trump speaks to members of the media aboard Air Force One before landing in West Palm Beach, Florida, U.S., March 28, 2025. 

Kevin Lamarque | Reuters

Policy uncertainty and new sweeping tariffs from the Trump administration are combining to create a stagflationary outlook for the U.S. economy in the latest CNBC Rapid Update.

The Rapid Update, averaging forecasts from 14 economists for GDP and inflation, sees first quarter growth registering an anemic 0.3% compared with the 2.3% reported in the fourth quarter of 2024. It would be the weakest growth since 2022 as the economy emerged from the pandemic.

Core PCE inflation, meanwhile, the Fed’s preferred inflation indicator, will remain stuck at around 2.9% for most of the year before resuming its decline in the fourth quarter.

Behind the dour GDP forecasts is new evidence that the decline in consumer and business sentiment is showing up in real economic activity. The Commerce Department on Friday reported that real, or inflation-adjusted consumer spending in February rose just 0.1%, after a decline of -0.6% in January. Action Economics dropped its outlook for spending growth to just 0.2% in this quarter from 4% in the fourth quarter.

“Signs of slowing in hard activity data are becoming more convincing, following an earlier worsening in sentiment,” wrote Barclays over the weekend.

Another factor: a surge of imports (which subtract from GDP) that appear to have poured into the U.S. ahead of tariffs.

The good news is the import effect should abate and only two of the 12 economists surveyed see negative growth in Q1. None forecast consecutive quarters of economic contraction. Oxford Economics, which has the lowest Q1 estimate at -1.6%, expects a continued drag from imports but sees second quarter GDP rebounding to 1.9%, because those imports will eventually end up boosting growth when they are counted in inventory or sales measures.

Recession risks rising

On average, most economists forecast a gradual rebound, with second quarter GDP averaging 1.4%, third quarter at 1.6% and the final quarter of the year rising to 2%.

The danger is an economy with anemic growth of just 0.3% could easily slip into negative territory. And, with new tariffs set to come this week, not everyone is so sure about a rebound.

“While our baseline doesn’t show a decline in real GDP, given the mounting global trade war and DOGE cuts to jobs and funding, there is a good chance GDP will decline in the first and even the second quarters of this year,” said Mark Zandi of Moody’s Analytics. “And a recession will be likely if the president doesn’t begin backtracking on the tariffs by the third quarter.”

Moody’s looks for anemic Q1 growth of just 0.4% that rebounds to 1.6% by year end, which is still modestly below trend.

Stubborn inflation will complicate the Fed’s ability to respond to flagging growth. Core PCE is expected at 2.8% this quarter, rising to 3% next quarter and staying roughly at that level until in drops to 2.6% a year from now.

While the market looks to be banking on rate cuts, the Fed could find them difficult to justify until inflation begins falling more convincingly at the end of the year.

Continue Reading

Economics

Tariffs to spike inflation, stunt growth and raise recession risks, Goldman says

Published

on

U.S. President Donald Trump announces that his administration has reached a deal with elite law firm Skadden, Arps, Slate, Meagher & Flom during a swearing-in ceremony in the Oval Office at the White House on March 28, 2025 in Washington, DC. 

Andrew Harnik | Getty Images

With decision day looming this week for President Donald Trump’s latest round of tariffs, Goldman Sachs expects aggressive duties from the White House to raise inflation and unemployment and drag economic growth to a near-standstill.

The investment bank now expects that tariff rates will jump 15 percentage points, its previous “risk-case” scenario that now appears more likely when Trump announces reciprocal tariffs on Wednesday. However, Goldman did note that product and country exclusions eventually will pull that increase down to 9 percentage points.

When the new trade moves are enacted, the Goldman economic team led by head of global investment research Jan Hatzius sees a broad, negative impact on the economy.

In a note published on Sunday, the firm said “we continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed.”

Inflation above goal

On inflation, the firm sees its preferred core measure, excluding food and energy prices, to hit 3.5% in 2025, a 0.5 percentage point increase from the prior forecast and well above the Federal Reserve’s 2% goal.

That in turn will come with weak economic growth: Just a 0.2% annualized growth rate in the first quarter and 1% for the full year when measured from the fourth quarter of 2024 to Q4 of 2025, down 0.5 percentage point from the prior forecast. In addition, the Wall Street firm now sees unemployment hitting 4.5%, a 0.3 percentage point raise from the previous forecast.

Taken together, Goldman now expects a 35% chance of recession in the next 12 months, up from 20% in the prior outlook.

The forecast paints a growing chance of a stagflation economy, with low growth and high inflation. The last time the U.S. saw stagflation was in the late 1970s and early ’80s. Back then, the Paul Volcker-led Fed dramatically raised interest rates, sending the economy into recession as the central bank chose fighting inflation over supporting economic growth.

Three rate cuts

Goldman’s economists do not see that being the case this time. In fact, the firm now expects the Fed to cut its benchmark rate three times this year, assuming quarter percentage point increments, up from a previous projection of two rate cuts.

“We have pulled the lone 2026 cut in our Fed forecast forward into 2025 and now expect three consecutive cuts this year in July, September, and November, which would leave our terminal rate forecast unchanged at 3.5%-3.75%,” the Goldman economists said, referring to the fed funds rate, down from 4.25% to 4.50% today.

Though the extent of the latest tariffs is still not known, the Wall Street Journal reported Sunday that Trump is pushing his team toward more aggressive levies that could mean an across-the-board hit of 20% to U.S. trading partners.

Get Your Ticket to Pro LIVE

Join us at the New York Stock Exchange!
Uncertain markets? Gain an edge with 
CNBC Pro LIVE, an exclusive, inaugural event at the historic New York Stock Exchange.

In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12.

Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!

Continue Reading

Trending