That’s convincing.
Why does Trump want the market to be adjusted in the short term?
1️⃣ Nearly $7 trillion in debt due over the next six months. If it fails to repay, it will have to be refinanced at higher interest rates
2️⃣ The Trump administration does not want refinancing at interest rates above 4%. FYI, the 10-year Treasury yield rose to 4.8% at one point this year
3️⃣ To lower 10-year interest rates? Market recognition that DOGE actually works with signs of slowing growth
The Trump Administration’s Strategy
- Creating Uncertainty: Leveraging Tariff Policies
- Stock Market Weakness Inducement: Investors Sell Stocks And Buy Bonds That Are Safe Assets When Uncertainty Grows
- Bond purchases increase → interest rates fall: When demand for bonds increases as markets become unstable, government bond rates fall
- Fed’s justification for rate cuts: Lower interest rates create an environment for the Fed to make further rate cuts
- Result: Reduce refinancing costs
➡️ Tariffs are usually expected to trigger inflation and raise interest rates on 10-year Treasuries, but they are now working the other way around. This is due to uncertainty given by the tariffs, which have led to interest rates falling as investors sell stocks and buy bonds
➡️ In other words, the Trump administration is leveraging a strategy to refinance debt at lower interest rates in the long run, while risking market pain in the short run