Some imagine that Donald Trump is intentionally trying to trigger a pointy downturn in equities to pressure a flight into treasuries. If that’s the case, the Federal Reserve would have extra of a purpose to slash rates of interest—Trump’s longstanding want. Trump has said that the markets are present process an “operation” of kinds, however I might not underestimate his long-term plan right here.
Trump overtly states that he desires firms to maneuver manufacturing to the US to keep away from tariffs. This can even promote home commerce as firms will search to keep away from levies. US farmers shall be incentivized to promote domestically, which might decrease the value of groceries a lot to the pleasure of the American public.
The concept a decline within the inventory market might really trigger a flight into treasuries sounds counterintuitive on the floor, however once you perceive how capital flows and confidence function globally, it makes excellent sense. Capital strikes globally and at all times seeks the most secure place to park. Unexperienced and retail merchants are inclined to panic at bigger downturns and dump.
The whole lot comes all the way down to CONFIDENCE. A downturn in equities might 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 now we have seen because the 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 had been introduced. JPMorgan, for instance, stated that there’s now a 60% danger of a recession and is shifting towards the bond market.
Decreasing treasury charges will make houses extra inexpensive by reducing mortgage charges. Particular person nations had been fleeing US treasuries, creating an enormous danger for an eventual default. Abruptly, no less than quickly, the inventory market now not looks as if a secure place to park cash. The Trump Administration first confirmed the world that it was reducing spending and trying 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 circulate 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 could take pleasure in a short lived decline in treasury yields resulting from these tariffs.
