US bond markets have had a minor meltdown since former President Donald Trump pulled ahead in prediction markets and then won a second term last week, putting upward pressure on mortgages and other household borrowing costs. If the move continues, it could be a major source of disappointment for voters who trusted Trump to improve housing affordability and the cost of living.
Fortunately, there's a clear way for him to mitigate that damage and start his term on the right foot with bond markets: He should declare his full faith in Federal Reserve Chair Jerome Powell, whose term runs until May 2026, and pledge to hold his tongue on matters of monetary policy. I know this is a long shot, but do hear me out.
On the back of the worst inflation in four decades, Trump's agenda of new import tariffs and high deficits has made bond investors understandably nervous. Trump's record of antagonism towards the country's independent central bank, the key safeguard against higher prices, only makes this worse.
During his first term, Trump famously berated Powell on Twitter for keeping rates too high. He has since said that he would not reappoint Powell in 2026.
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