Lower interest rates on U.S. Treasury bonds? Check.
U.S. dollar down? Check.
An economic panic that makes people easier to manipulate? Check, check, check.
This isn’t just me talking. This is Team MAGA itself. As we observed here just a week ago, U.S. President Donald Trump wants and needs both the U.S. dollar DX00 and long-term U.S. interest rates to fall.
The turmoil that has followed Trump’s “liberation day” batch of tariffs is delivering exactly that.
Meanwhile it was Trump’s own close adviser Elon Musk who said the quiet part out loud last fall, shortly before the election, when he stated that panic and “necessary hardship” would be on the administration’s agenda.
We told you about that, too.
So why people are acting so surprised is anyone’s guess. This isn’t an accident. This is “mission accomplished.” Trump needed this sort of turmoil to enact his economic agenda, and he’s getting it.
How much pain is being felt by Trump, by Treasury Secretary Scott Bessent, by Commerce Secretary Howard Lutnick or by Tesla TSLA boss Musk? All four are billionaires. When you’re that rich, stock-market turmoil isn’t a hardship or even a risk. It’s an opportunity.
For everyone else — investors, business owners, workers — it’s another matter. With apologies to the late football coach Woody Hayes, roughly three things can happen right now in the financial markets. Two of them are not too disastrous.
‘Big, beautiful’ trade concessions
The first would be that foreign governments from Brussels to Beijing trim their sails to Trump’s maelstrom, announcing the kind of “big, beautiful” trade concessions that would allow the president to call off the tariff storm while claiming a win. The concessions might be more show than substance, but who cares?
From where we’re sitting now, this would be a pretty decent outcome.
The second possibility would be a sudden outbreak of constitutionalism, political responsibility or at least self-preservation among the 273 Republicans currently drawing salaries as U.S. representatives and senators. They — and maybe they alone — could actually force Trump to change course.
As I mentioned in a column just before Trump took office in January, the president does not control the nation’s “fifth estate” — the financial markets. They will be heard. If the White House won’t listen, sooner or later Capitol Hill will — especially if economic conditions worsen.
Kentucky Sen. Rand Paul, not previously suspected of being in the pay of “international globalists,” has already publicly questioned the constitutionality of a president unilaterally imposing taxes. Presumably Paul will soon be primaried by Team MAGA for his impudence. “Senator Laura Loomer” might have a nice ring to it.
But some of Paul’s colleagues might also decide, later if not sooner, that they are more scared of a sea of red ink than a sea of red hats. In the 2024 congressional elections, 22 House Republicans won by less than 10 percentage points, and 15 won by less than 5 points.
Meanwhile, some 54% of Americans own retirement accounts. Many of these people typically vote Republican. They will be going to the polls in 20 months’ time for the U.S. midterm elections.
Some 99% of Americans also depend on a healthy economy for their livelihoods, whether they have investments or not. Republicans in Congress might want to ponder Thursday’s stock-market shock in more detail.
For instance, the S&P 500’s 4.8% fall on Thursday slightly exceeds the U.S. market benchmark’s 4.7% plunge seen on the day Lehman Brothers collapsed in 2008.
And despite Bessent’s quip that the stock market had “a Mag Seven problem, not a MAGA problem,” the turmoil is not restricted to big, powerful companies, least of all those run by technology tycoons.
Small-company stocks fell by more than big-company stocks: The S&P Small Cap 600 Index SML dropped more than 7% on April 3. Shares of “Main Street” companies that reflect the real economy were in the eye of the storm. Homebuilders’ share prices fell 6%. Shares of smaller regional banks and savings banks fell 10%. FactSet reports that 58 publicly traded companies are headquartered in Ohio: On April 3, their shares fell 5.9% on average.
One day’s stock-market action alone won’t matter too much. But stocks tend to be forward-looking. Falling share prices tend to anticipate tougher times ahead.
What is most disturbing is the third possibility — namely that neither foreign governments nor America’s legislators decide there is anything they can do, or want to do, and Trump continues to carry out his economic agenda without constraint. I’m willing to wager good money that nobody really knows where this would lead — including the current occupant of the White House.
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MARKET WATCH
