The New York Stock Exchange may need to hang a sign on the front door: "Abandon all hope ye who enter here." Gaping at the US stock market these days is not for the light-hearted. It is a Herculean affair as an ocean of red ink floods Wall Street. But will short-term pain fuel long-term gains? This could be the strategy adopted by the administration as it engages in a full-court press to lower interest rates, reshore domestic manufacturing, and "Make America Wealthy Again." But will the country have an appetite for this?
Sir, Interest Rates Have Fallen
At the onset of President Donald Trump’s second term, the Republican leader urged the Federal Reserve and central banks worldwide to cut interest rates. The Eccles Building did not heed the recommendation. After slamming Fed Chair Jerome Powell in several social media posts and interviews with the press, Trump has refrained from lashing out at Powell and Co.
The White House ostensibly adopted a new course of action: Concentrate on the benchmark ten-year Treasury yield, not the central bank. But why does this conventional fixed-income asset matter? The ten-year bond is a crucial instrument for the global economy as it represents more than the rate the US government pays to borrow for ten years. It can reflect economic health, influence borrowing costs (mortgages and auto loans), and impact international financial markets.
In several press interviews, Treasury Secretary Scott Bessent hinted at this strategy. "The president wants lower rates," he told Fox Business host Larry Kudlow in February. "He and I are focused on the ten-year Treasury and what is the yield of that.” And he certainly has been.
As Liberty Nation News has reported, the ten-year yield rocketed in September, even as the Fed kicked off its easing cycle with a super-sized 50-basis-point interest rate cut. The yield spiked more than 100 basis points, eventually peaking at 4.8% in mid-January. Since then, the bond has plummeted 80 basis points, reaching 4% for the first time in six months (it fell to as low as 3.86% in intraday trading on April 4). The sharp descent will prove crucial for prospective homeowners and motorists. However, it will also be integral for the US government and taxpayers nationwide.
In 2025, more than $9 trillion of federal debt will require refinancing. To prevent a fiscal crisis from forcing the government to make crucial financial choices, the United States would be better served by refinancing at a lower interest rate. By crashing the financial markets and sending investors into conventional safe-haven assets, thereby lowering the yield, Uncle Sam has potentially saved himself billions of dollars in interest charges. This is huge.
Of course, this 4D chess masterplan has one victim: savers – but they are collateral damage.
MAGA Has Come for Oil
President Trump pledged to slash energy prices in half during the campaign trail. It was a lofty ambition, and many market analysts scoffed at the proposal. If current trends in global oil markets persist, he could be close to achieving this aim. When Trump returned to the Oval Office, crude prices hovered around $80. As of April 2, they are trading at about $62 per barrel – $20 and change to go!
While facilitating the "drill, baby, drill" Republican initiative could be tricky, the collapse in oil prices is an early victory for Trump. So, how did this happen? Various developments have occurred in recent months: China's weakening economy, the Organization of the Petroleum Exporting Countries (OPEC) ramping up production, tariff-related demand woes, and global recession fears.
The bad news for the administration, however, is that the sharp drop came at a bad time. Although oil accounts for about half the price of a gallon of gasoline, the industry is transitioning from wintertime blends to summer alternatives, which is a costly switch. According to the American Automobile Association, the national average price for a gallon of gas is $3.27, up from $3.10 a month ago.
“Several factors are driving the increase, including refinery maintenance and summer-blend gasoline switch. The last time the national average reached $3.26 was back in September, consistent with seasonal shifts, but current prices remain below what they were this time last year,” the group said in an April 3 report.
It is a catch-22 for President Trump, say ING commodity strategists. “Current price levels mean it is unlikely that Trump is going to be successful in boosting domestic oil production. US oil producers are price sensitive. If Trump wants higher US oil production, we will need higher oil prices,” they wrote in a recent research note.
Still, lower oil prices could soon filter through to gasoline stations in the coming weeks.
Trump Saves Uncle Sam?
Bessent, following Trump’s announcement, has been participating in the media circuit championing and defending these universal and higher reciprocal tariff plans. From touting a rebalancing of global trade to shrugging off the market crash, the seasoned hedge fund billionaire presented much of the same talking points. However, he neglected to point out one crucial thing in this entire tariff tumult: Interest rates and borrowing costs are declining sharply – for the American people and the US government.
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