World's largest economy on a sugar high? Citadel CEO flags warning signs that usually appear in recession

Citadel founder and CEO Kenneth C Griffin has warned that Wall Street’s record-breaking run is being fuelled by policies designed for a downturn rather than a booming economy. The mix of fiscal and monetary support has created a “sugar high” that hides deeper risks such as sticky inflation and a weakening dollar, he said. “We’re definitely on a bit of a sugar high in the US economy right now,” he said in an interaction with Bloomberg on the sidelines of a Citadel Securities conference on Monday, warning that the picture “isn’t as solid as it looks,” foreign media reported.

Even as US equities touch new highs, Griffin reportedly pointed to gold’s dramatic rise--up more than 50 per cent this year--as a signal that investors are hedging against sovereign risk. Gold futures crossed $4,000 an ounce this week, while the dollar has dropped about 10 per cent in 2025.

'In middle of a recession'

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The level of government and Fed support in place today is usually seen “in the middle of a recession," he reportedly said in the interview.

The Trump administration, he said, is “very much aligned with seeing the success of the American worker. So a number of the policies that are being effectuated really are about the average American family feeling that life is better and working better for them.” Griffin added that this backdrop is “fueling much of the enthusiasm that we see in markets in the United States.”

Griffin cautioned that “it’s a very pro inflationary environment and I think the markets are just way too calm about the prospects of a substantial move higher [in inflation].”

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He also highlighted the Fed’s challenge, saying they are “trying to make a decision between buying some downside protection on the labour market and managing inflation,” warning of potential risks if inflation reaccelerates in early 2026.

On the policy front, all eyes are on US President Donald Trump’s One Big, Beautiful Bill Act, which he calls the biggest middle-class tax cut in history. At the same time, the White House has been urging the Federal Reserve to continue cutting rates, even though inflation remains well above the 2 per cent target.

The Fed recently trimmed rates by 25 basis points, taking them down to 4–4.25 per cent. Traders now see a 92 per cent chance of another cut later this month, which would bring the benchmark closer to 3.75 per cent.

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Shift to hard assets

That policy mix has stirred questions about the dollar’s long-term safe-haven role. Griffin reportedly said in the interview: “We’re seeing substantial asset inflation away from the dollar as people are looking for ways to effectively de-dollarise, or de-risk their portfolios vis-à-vis US sovereign risk.”

Bitcoin has climbed 9 per cent in October to a record $126,000, joining gold, silver and other hard assets in what Griffin described as a broad “debasement trade.”

Fiscal worries ahead

Griffin said the bigger worry is America’s fiscal trajectory. “I now view gold as a safe harbour asset in a way that the dollar used to be viewed. That’s what’s really concerning to me,” he said. Foreign investors, he added, are increasingly hedging US equity gains back into local currencies to limit sovereign exposure.

“The US fiscal situation is that of a nation that’s trying to work its way out of a recession,” Griffin warned. “Except the reality is, we’re multiple years into a period of high growth. At this point in the cycle, we should be running a surplus. Instead, we’re running a deficit of 6 per cent to 7 per cent. That is just completely irresponsible.”