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The lede from President Trump's speech last night was not barking dems, boys with brain cancer, or even 'the golden age has begun'. No, the lede was Trump's focus on interest rates.
As a former bond guy for close to two decades, I can tell you James Carville was right when he said the bond market controls the world.
I even wrote a book about it while commuting into Wall Street which is still very prescient to this very day - Currency.
We have lost that wisdom over the last couple decades as a corrupt Fed kept interest rates low and the Treasury did not extend maturities of our debt out to 100 years with zero rates.
This was criminal.
The U.S. has a massive refinance obligation in the short run. A $7T hurdle. The OBiden regime loaded up short term debt in a gambit to tank America's financial system, by forcing a massive refinance at much higher rates.
We can't afford it, and the Trump team knows it.
So, pain is coming for Wall Street, but The White House is focused on Main Street.
Rates have to come down, and you do that with a slowing economy - make people scared, make them move to risk off, and buy UST.
Trump: “Interest Rates took a nice beautiful drop in the last few days.”
If you don’t want to listen to Bessent, Trump is now literally talking about rates in his State of the Union. It couldn’t be more clear.
BESSENT: “Over the medium term, which is what we’re focused on, it’s a focus on Main Street. Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers. We are going to rebalance the economy.”
Short-term pain is their plan.(@Geiger_Capital)
WHY DONALD TRUMP WANTS THE MARKET TO CRASH ….in the short term
This chart below sums up the reasoning behind what the current adminstration is doing and why it is having adverse effects on the market. Kris @KrisPatel99 did a great job today explaining this more in depth on the market open & I think the thesis checks out:
1. We have $7T of debt we need to pay in the next 6 months…if we don’t pay it, we’ll have to refinance.
2. The Trump admin does NOT want to refinance at a 4%+ rate…the 10yr at one point this year was 4.8%.
3. How do you get the 10yr to come down? Markets need to show weakness in growth, DOGE has to be perceived as actually working, interest rates need to come down. The way to do that is to create massive uncertainties — aka tariffs — which can slow down growth in the short term, get the bond market to start BUYING bonds ASAP because of how scared they are of touching stocks (causing yields to fall which is what we need to refinance the debt) and then that gives the Fed the authority to lower rates which continues to bring yields down.
So, although conventional wisdom says tariffs are inflationary and the 10yr should be spiking on more tariffs — it’s actually going down because its bringing so much uncertainly to equity markets that people are selling stocks and buying bonds! Which is exactly what the Trump administration wants to happen in the short term in order to bring refinancing costs down. Short term pain for long term gain? @amitisinvesting
