Why the 'Trump put' for investors might be found in Treasuries, not the stock market

Investors anxious for President Trump to return to his first-term playbook of tweeting about the stock market may have quite a wait ahead of them.

While tariffs have hit equity prices hard in recent weeks, a growing number of Wall Street strategists point to Trump’s likely first order of business: lowering bond yields — even if it comes at the expense of a falling S&P 500 (^GSPC).

On Thursday, the broad-based index slipped, with year-to-date losses hovering near 1.5%

“It’s reasonable to think that the index has to fall quite a bit more before Trump views it as a concerning signal,” Jason Draho, head of asset allocation Americas for UBS Global Wealth Management, wrote earlier this week.

“What we conjecture is that the relevant Trump put right now is for Treasuries, and that lower yields, not higher stock prices, are the best market indicator of success for Trump 2.0 policies,” he added.

One important point to keep in mind: The 10-year Treasury (^TNX) yield is a benchmark for borrowing costs. A decrease in bond yields signifies lower costs for the refinancing of debt. On Thursday the 10-year rose for a third straight session to 4.28%, but sat lower than the yield of more than 4.6% when Trump took office.

Draho added that “the best indication of a Treasury put is that Trump himself has tweeted very little about stock market performance, instead posting more often about the debt ceiling and government spending.”

In front of Congress on Tuesday, Trump said, “Tariffs are about making America rich again and making America great again. And it’s happening and it will happen rather quickly. There’ll be a little disturbance, but we are okay with that. It won’t be much.”

Read more: What Trump’s tariffs mean for the economy and your wallet

When asked about the impact of tariffs on falling equity prices, Treasury Secretary Scott Bessent also telegraphed that the White House priority in the short run isn’t the stock market.

“Over the medium term, which is what we’re focused on, it’s a focus on Main Street,” Bessent told “Fox & Friends” earlier this week. “Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers, so we are going to rebalance the economy.”

The presumption is that if the economy slows enough, the Fed would step in to lower rates, while tax cuts and deregulation would spur growth. “Rather than slower growth being deemed a policy error, Trump may view this as a necessary precursor to higher future growth,” Draho wrote.

“Investors, being impatient, would be more forgiving of this approach if it was coupled with future growth-enhancing policies such as tax cuts and de-regulation. Those policies are likely to come later in the year, an important sequencing that investors should not forget as they assess current growth,” he added.

In a note on Wednesday morning, Nomura managing director Charlie McElligott wrote that a “negative wealth effect” is something the Trump administration is “actively acknowledging in order to rebalance the US economic hierarchy, as he attempts to shift growth from being dependent upon Government spending excess into something that is driven more by the private sector.”

“This is hugely risky without a doubt,” wrote McElligott. “And there is a price for everything, i.e. in the case of an increase in the speed/velocity of market shocks, which can then absolutely force him to trial-balloon softer, ‘conciliatory’ tones.”

Those concessions started on Wednesday when the Trump administration gave a temporary exemption to the Big Three automakers after forging ahead with 25% tariffs against trading partners Canada and Mexico earlier this week.

On Thursday President Trump announced a delay on import tariffs involving Mexican goods and services compliant with the US-Mexico-Canada Agreement (USMCA). However the S&P 500 still sank to session low as there was no mention of Canada in that exemption announcement.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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