- The Trump administration talks a lot Regarding the 10-year Treasury yield, mortgage rates and other common loan benchmarks, the president promises to reduce borrowing costs for Americans. Data show that more households are exposed to changes in interest rates than volatility in the stock market, but the impact of tariffs on inflation may ultimately be the most influential economic problem for voters.
Donald Trump likes boast About the stock market at the beginning of his first job in the Oval Office. But with the stock price Go away In his one-time, out-of-time tariff threats and installation Fear of recessionThe president says he no longer uses the S&P 500, which is Correction area In mid-February, the index fell 10% on Thursday after yardage declined by 10% in the second semester.
Instead, a new government, including Treasury Secretary Scott Bessent, Bond Market Trump promises to reduce Americans’ borrowing costs. Bessent said the president’s focus is to see a drop in yields on the Treasury notes in 10 years, the country’s benchmark for nearly $12.6 trillion interest rates Mortgage Marketmany corporate bonds and governments’ own interest payments.
“We focus on the real economy. Can we create an environment where there are long-term gains in the market and long-term gains for the American people?” Bessent told CNBC Thursday. “I don’t care about the volatility of three weeks.”
Regardless of Trump’s true feelings, data suggests that Americans are more likely to experience interest rate changes than stock market fluctuations. According to Gallup in 2023 pollingNearly 80% of American households have some kind of debt, according to Go to the Federal Reserve. The 10-year yield has dropped by about 50 basis points a week before Trump took office, although it hit 4.30% on Friday morning.
Political strategists and venture capitalists “have more influence than S&P than S&P. Voters are affected more by interest rates.” Bradley Ivory Tell wealth. “But inflation dwarfs them both.”
Obviously the market doesn’t like it Tariff uncertaintyalthough Friday morning bounced back a little. It remains to be seen whether more protectionist measures will lead to lower growth rates and higher prices, Both (worst case), or neither. Even though many Americans have probably seen the value of 401k and other retirement plans in recent weeks, there are still signs that a drop in yields has had an impact.
Mortgage Rate Freddie Mac once a week, fell for a month and a half estimate Thursday’s ticking was slightly higher, although the agency said the average interest rate on 30-year mortgages fell to 6.65% after exceeding the 7% threshold in early January.
“In spite of the tiny impact, rates are still at their lowest level of the year, and if they continue to decline, you may bring a welcome boost as the spring housing market begins,” Lisa Sturtevant, chief economist for multiple listing services, wrote in a note Thursday.
Lower mortgages may not solve the country’s structure Housing deficitbut they can cultivate those homeowners who feel itlocking“They received interest rates before borrowing fees in 2022. Mortgage applications increased by 11% last week, according to Index calculated by the Association of Mortgage Bankers.
Why Trump has to pay attention to the Treasury Department for 10 years
Long-term yields are highly correlated with the Fed’s overnight lending rate, which allows central bank decisions to spread throughout the economy. However, the relationship is not perfect, as Matt Sheridan, the main portfolio manager of Alliancebernstein’s revenue strategy, explained that the market for free-floating assets, such as free-floating assets, is based on other factors as well. He said expectations for economic growth, inflation and fiscal policy also play a role.
The yield representing investors’ annual returns falls as bond prices rise, and vice versa. This often happens if investors think the Fed will be forced to lower interest rates, which makes payments for existing bonds higher than new debts.
On the contrary, if you are worried about the government Debt burden Increase, investors may demand higher returns. Sheridan said that fixed-income investors have not been too worried about the federal deficit over the past few months and are now more anxious about the economy. Initially, many traders thought Trump would focus on the facilitation aspects of his agenda, such as tax cuts and deregulation.
“I think investors are a little surprised by the new government’s priority tariffs,” he said.
A White House spokesman said the secondary rally in the bond market reflects the new administration’s efforts to restore “fiscal stability and confidence.”
“President Trump has been committed to restoring our country’s fiscal credibility, which has been undermined by reckless spending in the last administration,” Harrison Fields, deputy secretary and special assistant to the president, said in a statement.
Marko Papic, chief strategist at BCA Research, said it was wrong to suggest Trump is unwilling to enjoy past equity volatility during his first term. After all, despite the president’s performance and office changes every 35 hours in the first year, Every politicsthe S&P 500 fell 6% in 2018 as Trump launched the first trade war With China.
“President Trump published on the rise about the stock price when the stock price rose, and they did not drop at the time,” Papic said.
Some demographics tend to Lower exposure The stock market also seems to attract Trump, who beat Harris and his own 2020 performances among voters without a college degree, while those who earn less than $100,000.
“They may not care about the stock market, but they (or may not) buy new homes in the market,” said Tusk, a former campaign manager for New York City Mayor Michael Bloomberg.
“But all they have to do is buy groceries, or they may want to buy a new truck,” he added.
Aside from car loans, that’s why inflation and potential prices are rising from tariffs, which is an imminent economic problem.
This story was originally fortune.com
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