Reuters Econ World: Trump and treasuries
By Carmel Crimmins
July 3 -It’s been a good week for Donald Trump and don’t the markets know it.
This week’s Supreme Court ruling that Trump cannot be prosecuted for official acts as president all but assures he won’t face trial before the Nov. 5 election.
That outcome, on the heels of Biden’s stumbling debate performance, has Wall Street positioning for Trump 2.0. A steep selloff in U.S. government bonds reflects investors’ bet that a second Trump term will mean higher tariffs and deeper budget deficits that would drive up inflation and interest rates.
Check out the handy graphic below, with a tip of the hat to Americas Economics and Markets Editor Dan Burns for rustling it up.
President Biden is trying to reassure the Democratic Party that he can go toe-to-toe with Trump. One in three Democrats think he should end his re-election bid but no prominent elected Democrat does any better than Biden in a hypothetical matchup against Trump, according to a Reuters/Ipsos poll.
Who could beat Trump according to that poll? Former first lady Michelle Obama wins out but she has said repeatedly she does not intend to run.
While the speculation about Biden swirls, U.S. investors are heading off on their July Fourth holiday in buoyant form. A string of weaker-than-estimated economic reports reinforces the case for the Federal Reserve to start cutting rates this year. The S&P 500 and Nasdaq hit fresh all-time highs and bond yields, after climbing on the Trump trade, fell.
What would a Trump presidency mean for Jerome Powell and the Federal Reserve? It’s been an issue on the campaign trial and, given July Fourth, I thought we’d take a closer look at the topic of central bank independence in this week’s Reuters Econ World podcast. You can listen here.
Over in the UK, Britain’s Labour Party is set for a potentially historic win in parliamentary elections on Thursday. I’m sure they will celebrate but a hangover is guaranteed. The country is facing a litany of challenges from a huge debt burden to sluggish economic growth. Bon chance as the French would say.
And speaking of the French, hundreds of candidates are bowing out from Sunday’s run-off election to block the far right from power. We’ll have to wait and see if the move is enough to prevent Marine Le Pen’s National Rally from winning a majority in parliament.
Happy Fourth!
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The headlines
Biden reassures governors as Dem kingmakers float mini primary if he quits
Conservatives say Labour rivals heading for record-breaking UK election win
Hurricane Beryl takes aim at Jamaica as death toll creeps up, destruction widespread
The podcast
We’re taking a deep dive into independence … central bank independence that is. It has emerged as an issue on the 2024 U.S. campaign trail. So what’s at stake for Jerome Powell and the rest of the Federal Reserve? Jonathan Spicer covered the Fed during the Obama and Trump administrations before moving to Turkey, where President Tayyip Erdogan has not been shy about replacing his central bank chiefs. He joins me and European Economics Editor Mark John for a chat about the interplay of politics and monetary policy.
“You see throughout history, instances when the Fed is adjusted and shifted. It's hard though, the president can't just do it. He or she needs to get majorities or super majorities in Congress to change the Federal Reserve Act in the United States" -- Turkey Bureau Chief Jonathan Spicer on this week'spodcast
The chart
Americas Economics and Markets Editor Dan Burns produced this chart on how the Trump trade is impacting U.S. bond markets. It shows the surge in U.S. yields since June 28, the day after the debate, reflecting Wall Street's view that a Trump presidency will be inflationary.
The real world
Havana:Cuba's government says it's doubling down on price controls and efforts to fight tax evasion in its increasingly desperate bid to stave off the worst economic crisis since Fidel Castro's 1959 revolution
Dublin:Gambling giants are conquering the U.S. with tactics deemed too risky for the UK
Frankfurt:Taylor Swift is taking Europe by storm. But how real are the assertions about her economic impact?
The week ahead
July 4: Independence Day holiday. Stock and bond markets closed
July 4: UK parliamentary election
July 5: U.S. non-farm payrolls report
July 7: Second round of France's parliamentary election
July 11: Federal Reserve Chair Jerome Powell delivers testimony to Senate Banking Committee
Trump trade hits bond market https://www.reuters.com/graphics/USA-ELECTION/BONDS/lgpdojwknvo/chart.png
Editing by Rod Nickel
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