‘Big Short’ Investor Kyle Bass Warns US May Need Brief Recession To Rebuild Foundation

The founder of Hayman Capital Management said short-term pain will help the economy emerge on a firmer footing.

Kyle Bass, the founder of Hayman Capital Management, said on Thursday that the U.S. may need to experience a recession as it tries to redraw trade ties and cut fiscal deficit.

In an interview on Bloomberg Television, Bass said, “We might have to go to a brief recession in order to rebuild our foundation.”

Bass, who successfully predicted and bet against the U.S. subprime mortgage crisis of 2008, added that this was a necessary reset for the country’s future growth.

Trillions of dollars have been wiped out of the U.S. stock market since President Donald Trump announced universal 10% tariffs on all imports and even higher reciprocal tariffs on a host of countries.

Even though the U.S. paused the tariffs on most countries for 90 days to negotiate trade deals, Trump slapped 145% tariffs on China after Beijing retaliated by imposing its tariffs on U.S. goods.

Bass told Bloomberg that the moves will likely lead to a slight inflationary uptick on some goods, but short-term pain will help the economy emerge on a firmer footing.

He also said that Trump holds the upper hand in the brewing trade war with China, as the U.S. imports many Chinese goods.

“If we’re doing tit-for-tat on tariffs, China loses, because there is no functional equivalency in the amount of goods and services moving back and forth,” said Bass.

The SPDR S&P 500 ETF Trust (SPY) was 0.5% lower in extended trading, while the Invesco QQQ Trust, Series 1 (QQQ) was down nearly 0.7% at the time of writing.

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