Some consider that Donald Trump is intentionally making an attempt to trigger a pointy downturn in equities to drive a flight into treasuries. If that’s the case, the Federal Reserve would have extra of a cause to slash rates of interest—Trump’s longstanding need. Trump has said that the markets are present process an “operation” of types, however I might not underestimate his long-term plan right here.
Trump brazenly states that he needs firms to maneuver manufacturing to the US to keep away from tariffs. This will even promote home commerce as firms will search to keep away from levies. US farmers might be incentivized to promote domestically, which may decrease the worth of groceries a lot to the pleasure of the American public.
The concept that a decline within the inventory market may really trigger a flight into treasuries sounds counterintuitive on the floor, however whenever you perceive how capital flows and confidence function globally, it makes excellent sense. Capital strikes globally and all the time seeks the most secure place to park. Unexperienced and retail merchants are likely to panic at bigger downturns and dump.
Every little thing comes all the way down to CONFIDENCE. A downturn in equities may trigger a kneejerk response into treasuries as a result of folks nonetheless belief that the federal government will make good on their funds. Huge institutional cash started fleeing the general public sector for the personal sector years in the past. What we have now seen for the reason that implementation of Trump’s tariffs is a brand new demand for treasuries.
The 10-year treasury yield dropped from 4.25% in late March 2025 to 4.01% by April 1, whereas the two-year fell to three.68%. Billions have fled into the bond market since these tariffs have been introduced. JPMorgan, for instance, mentioned that there’s now a 60% threat of a recession and is shifting towards the bond market.
Reducing treasury charges will make houses extra inexpensive by lowering mortgage charges. Particular person nations have been fleeing US treasuries, creating a large threat for an eventual default. Out of the blue, a minimum of briefly, the inventory market not looks as if a secure place to park cash. The Trump Administration first confirmed the world that it was chopping spending and making an attempt to cut back the deficit. A downturn in rallies DOES NOT assure a rally within the bond market, however we’re witnessing a short-term stream into treasuries. Nonetheless, the pc has warned that 2028 will mark a serious turning level in confidence the place any remaining confidence in authorities vanishes. For now, we might take pleasure in a short lived decline in treasury yields attributable to these tariffs.
