Is the Trump Administration Intentionally Crashing the Stock Market?

The Big Question for Investors

the staff of the Ridgewood blog

Ridgewood NJ, the Dow Jones plunges 890 points after Trump declines to rule out recession .Over the past two weeks, financial markets have been buzzing with one major question: Is Donald Trump deliberately trying to tank the U.S. stock market?

At first glance, this might seem like an absurd notion. Trump, after all, is a businessman who has historically tied economic success to stock market performance. However, recent actions suggest a different strategy—one aimed at lowering interest rates by creating market uncertainty.

 Tariffs are an economically risky tool, and last week we were reminded of that financial reality. Stocks (and the dollar) have taken a beating as with every new tariff announcement.

The Strategy Behind the Market Drop

The idea is as follows :

1. The U.S. has $7 trillion in debt maturing in the next six months. If it’s not paid off, it must be refinanced.
2. The Trump administration wants to avoid refinancing at high rates—the 10-year Treasury yield hit 4.8% earlier this year.
3. To lower interest rates, the economy must appear weak, which triggers a flight to safety in the bond market.

How Market Uncertainty Lowers Interest Rates

One way to create short-term economic weakness is through tariffs, which introduce uncertainty and drive investors out of stocks and into bonds. This increases bond demand, lowers yields, and paves the way for Federal Reserve rate cuts.

Despite conventional wisdom suggesting tariffs would be inflationary and push rates higher, the opposite is happening—the uncertainty is leading to a market selloff, forcing investors into bonds and driving down yields.

Will the Fed Blink First?

Instead of waiting for the Federal Reserve to cut rates on its own, Trump and his team—led by Scott Bessent—are engineering a market downturn to force Fed Chair Jerome Powell into action. Trump has previously criticized Powell for not cutting rates fast enough, and now, his administration appears to be applying economic pressure to achieve that goal.

And it’s already having an effect:

• The 10-year Treasury yield has dropped from 4.8% in January to 4.25% this week.
• Mortgage rates are also declining, helping thaw the housing market as lower rates attract buyers and sellers.

What’s Next for Interest Rates?

According to prediction market Kalshi, expectations for rate cuts in 2025 are rising:

• 75% chance of two or more rate cuts this year
• 38% chance of a recession

Lower rates would benefit American consumers by making loans, mortgages, and credit more affordable, potentially boosting economic activity ahead of the 2024 election.

Final Thoughts

While it remains to be seen how this strategy will play out, one thing is clear: the Trump administration is focused on interest rates—and they’re willing to shake the markets to get what they want.

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