What if the recent tariff announcements causing market volatility were not just a coincidence, but a calculated move by the Trump administration?
Enter Scott Bessent – The Market Maestro
President Trump’s Secretary of the Treasury, Scott Bessent, seems like one of the few people out there currently defending the President’s aggressive tariff policy. Now, Bessent is no ordinary trader. He has more than 35 years of experience, and has worked alongside some of the greatest macroeconomic traders of all time—including George Soros. Bessent’s understanding of economic markets is unparalleled.
So, when Trump asked his team, "What do we need to bring down the 10-year yield and oil prices?" it's plausible that Bessent had a simple answer: Create market volatility. Bessent has been a vocal proponent of shaking up the current global trade norms, arguing that America should and that President Trump is beginning to “rebalance the U.S. and international economic system” through tariffs.
Why would Trump want the 10-year Treasury Yield and oil prices to decline?
- Cheaper borrowing: Lower yields mean lower interest rates on loans, which can boost spending and economic growth and stabilize the housing market.
- Lower inflation: Cheaper oil reduces costs for transportation and energy, helping keep overall prices down.
- Political wins: Trump can claim credit for making life more affordable for average Americans.
- Economic stimulus: Lower borrowing costs and energy prices can help stimulate the economy without needing government spending.
- Federal Reserve policy: Lower inflation pressure might prevent interest rate hikes, supporting Trump's preference for low rates.
- Campaign promises: Falling oil prices and borrowing costs align with Trump's promises to reduce living costs for voters.
These factors could help Trump argue that his policies are benefiting the economy and average Americans, which is politically advantageous.
The Logic Behind the Chaos
The relationship between economic turmoil, bond yields, and oil prices is intricate, as these variables are interconnected through inflation expectations, monetary policy, and market dynamics. Market turmoil fuels uncertainty and concerns investors that perhaps this can lead to a recession. When investors start worrying about a potential slowdown or recession, bond yields and oil prices naturally decline. And that’s exactly what has happened.
- The 10-year Treasury yield peaked at 4.8% on January 13th but has since dropped to 4.2%—a decline of nearly 13%.
Why?
Why the 10-year Treasury yield is declining:
- Economic worries: Investors are concerned about future economic growth, leading them to buy safer assets like Treasury bonds.
- Changing inflation views: The market now sees high inflation as temporary, not a long-term problem.
- Safe haven demand: In an uncertain world, more investors want the safety of Treasury bonds.
- Productivity hopes: Expectations of improved efficiency in various sectors are lowering long-term yield forecasts.
- Less government spending: Difficulties in passing big spending bills reduce expectations for future growth and inflation.
- Federal Reserve stance: The Fed's current policy creates uncertainty about future interest rates.
- Long-term outlook: The bond market is focusing more on potential long-term growth challenges than short-term inflation.
These factors combined are causing investors to buy more Treasury bonds, which pushes their prices up and yields down.
- Oil prices were at $80 per barrel on January 15th. Today, they sit at $65—a 20% drop.
Why?
Why oil prices are down:
- More supply: OPEC+ countries are producing more oil than expected.
- Trade concerns: U.S. tariffs are raising worries about slower economic growth and less oil demand.
- Economic worries: Fears about future economic growth are making oil less valuable.
- Future surplus: Markets expect there will be too much oil produced in 2025.
- Extra production capacity: Oil-producing countries can easily make more if needed, which keeps prices down.
These factors together are pushing oil prices to their lowest levels in several years.
Coincidence? Or a carefully orchestrated play?
The Trump ‘Put’
Trump has one eye on tariffs and the other on markets. Could he be using tariffs as a strategic tool, only to ease off when markets react too negatively? There’s already chatter that he may scale back on tariffs if the S&P 500 drops by 10%.
If true, this would be a masterclass in economic maneuvering—using policy as a lever to influence markets while keeping investors on edge.
So, is this just market noise? Or is Trump, with Bessent’s expertise, executing a high-level economic strategy right before our eyes?
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Philip G. Palumbo is Founder, CEO and Chief Investment Officer of Palumbo Wealth Management. He is a contributor on CNBC, Bloomberg, Reuters, Schwab Network and Cheddar News. His market insights have been quoted in such leading publications as The Wall Street Journal and Barron’s. He has authored, Make Work Optional, a book dedicated to assisting individuals and families on how to properly plan and invest their money. He served as Senior Vice President and Senior Portfolio Manager at UBS before forming Palumbo Wealth Management, a full-service boutique wealth management firm. Over the past 20 years, Philip has held senior roles with several major financial institutions and he has successfully assisted families and individuals navigate some of the most challenging market environments in recent history. The leadership Philip provided for his clients during these difficult markets has helped them achieve their most important financial goals as they prepare for retirement.