A $33 billion hedge fund is sounding the alarm on the US economy

Billionaire Paul Singer’s Elliott Management says we might be in for a recession if the Trump administration doesn’t pass reforms in taxes, regulation and health care.

Trump took office with a plan to cut taxes, cut back on regulations and boost infrastructure spending — all in a bid to raise economic growth. The plans have mostly been stymied by political disagreements over healthcare reform and a probe into Russia’s potential interference in the election.

In a private first-quarter letter to investors reviewed by Business Insider, the $US33 billion activist hedge fund laid out its concerns with the current situation.

“Although the growth agenda of the Trump administration is slow to get off the ground, markets still anticipate that much of it will be enacted, sooner or later,” the letter said.

But if the Trump administration fails to pass reforms, “the impact on the US dollar and equity markets would likely be negative,” the hedge fund wrote.

“There are actually forces in place that could point to a relatively near-term recession in the absence of solid new pro-growth policies,” the fund added.

Singer visited Trump in the White House in February, and reportedly donated funds for Trump’s inauguration. “He was a very strong opponent and now he’s a very strong ally and I appreciate that,” Trump said in February.

The automobile industry is one particular red flag supporting the notion of a potential recession, Elliott said.

“The number of cars sold has started to come off its historical highs, the financing terms for cars have been increasingly eased and lengthened (accelerating current purchases but building in a deeper falloff for the future), subprime auto loan defaults are rising, and used vehicle prices are falling,” the fund said.

Elliott, which raised $US5 billion in less than 24 hours earlier this month, also said it has been building up its cash reserve to deploy during future market turmoil.

Elliott managed about $US33 billion as of April 1, the letter said.

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