Donald Trump may have a strategic reason for wanting to crash the stock market—specifically, to drive down bond yields, making it cheaper for the U.S. government to refinance its massive debt burden. Here’s a breakdown of the idea:
1. The $7 Trillion Refinancing Problem
• The U.S. government needs to refinance $7 trillion of debt in the next six months.
• Current 10-year Treasury yields are high (above 4%), making refinancing expensive for the government.
• If yields stay high, the government would have to pay much higher interest on new debt, worsening the deficit.
2. Trump’s Alleged Strategy: Crash Stocks, Pump Bonds
• A stock market crash increases demand for U.S. Treasuries because investors seek safe-haven assets.
• Higher demand for bonds pushes bond prices up and yields down (bond prices and yields move inversely).
• Lower yields make it cheaper for the government to refinance debt at lower interest rates.
3. How This Forces the Fed to Cut Rates
• If bond yields drop significantly, it puts pressure on the Federal Reserve to cut interest rates.
• Rate cuts are bullish for risk-on assets like stocks, crypto, and real estate.
• This could lead to another market rally after the initial stock drop.
4. Long-Term Play: Don’t Panic
• The short-term market drop may look bad initially, but if this theory plays out, it will set up a bullish scenario later.
• Once yields drop and rate cuts come in, risk assets will likely rebound hard.
Key Takeaway
• If this theory is correct, Trump’s goal is not to kill the market, but to reset bond yields lower to help the U.S. refinance its debt.
• Smart investors should think long-term and use any short-term panic as a potential buying opportunity.