Hello there.

Welcome to the week! If you thought Trump’s rivalry with the Fed would end with Powell’s exit, your name might be Kevin Warsh.

Somewhere on a sunny beach, sippin’ a virgin daiquiri, Jerome Powell is overwhelmingly glad he retired. At least, that’s how I like to think of it. Who knows, maybe he’s a mojito guy. Let’s get into it. 👇

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So, Trump posted on Truth Social Friday morning, threatening to cut off trade with major US partners unless the Federal Reserve slashes interest rates. That's… a hefty threat.

The post came right after August jobs numbers dropped, showing 162,000 new hires, which was actually way better than the 53,000 economists expected. Most presidents would take a victory lap. Trump saw it as leverage, writing, and I quote, "LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT."

Here's what makes this genuinely wild: the U.S. trade deficit hit $88.6 billion in July, the highest since March 2025. We're running deficits with Mexico ($27.5 billion), Vietnam ($23.3 billion), China ($15.2 billion), and basically everyone we trade with. Trump threatening embargoes on all of them is like threatening to blow up the entire global supply chain because the Fed won't do what he wants. And yeah, he probably has the legal authority to actually do it under the International Emergency Economic Powers Act.

Markets immediately priced in a 60% chance the Fed raises rates instead of cutting them at their September meeting. Which is the exact opposite of what Trump wants, but strong jobs numbers plus still-high inflation give the Fed zero reason to help. Bond yields jumped across the board, the dollar weakened, and investors started gaming out what happens if the president actually follows through on economic sanctions against our biggest trading partners over an internal squabble. And somehow, it’s all good eating for the predictions market. Par for the course.

While everyone's watching Trump's Fed drama, something debatebly weirder is happening in global bond markets. Japan, Italy, the UK, and France are all seeing bond yields spike, which is bizarre because they're all borrowing way less than the US right now.

Normally, bond investors punish countries that borrow too much by demanding higher interest rates to compensate for the risk. But that's not what's happening. Instead, yields are rising everywhere because investors are nervous about two things: inflation staying high thanks to the Iran war’s effect on oil shipments, and whether these countries can actually grow their economies fast enough to pay back all the debt they've already piled up.

The US is forecast to grow over 2% thanks to AI spending and consumer spending staying strong. Europe and Japan are looking at barely 1% growth while dealing with aging populations and shrinking workforces. So even though they're borrowing less right now, investors are skeptical they'll be able to handle their existing debt loads in the long term without economic growth to back them up.

The US Treasury is doubling down on debt buybacks starting September 9th, which basically means the government is borrowing new money to buy back old debt that investors no longer want. Critics are calling it treating symptoms instead of the actual problem, which is that inflation's making investors demand better returns, and nobody wants to lend cheap money to governments that might not be able to pay it back. Call it global growing pains, I guess.

Elected officials have had a tremendous amount of success in the market recently.

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That’s all for today. Write us and let us know your thoughts on the market, the newsletter, or the weather—we’d just love to hear from you.

Till next time,
— Brandon and Blake with Invested Inc.