Connect with us

Tech News

Why lowering the yield on 10-year bonds is more important to Trump than the stock market or interest rates

Published

on

  • The Trump administration has talked a lot about the yield on the 10-year Treasury, the benchmark for rates on mortgages and other common types of loans, as the president pledges to bring down borrowing costs for Americans. Data suggests more households are exposed to changes in interest rates than swings in the stock market, but the effect of tariffs on inflation might ultimately be the most impactful economic issue for voters. 

Donald Trump loved to brag about the stock market at the start of his first stint in the Oval Office. But as share prices tumble amid his on-again, off-again tariff threats and mounting recession fears, the president has indicated he’s no longer using the S&P 500, which closed in correction territory on Thursday after the index dropped 10% from its high in mid-February, as a yardstick during his second term. 

Instead, the new administration, including Treasury Secretary Scott Bessent, has been much more vocal about the bond market and Trump’s pledge to lower borrowing costs for Americans. Bessent has said the president’s focus is on seeing a decline in the yield on the 10-year Treasury note, the benchmark for rates in the country’s nearly $12.6 trillion mortgage market, many corporate bonds, and the government’s own interest payments.

“We’re focused on the real economy. Can we create an environment where there are long-term gains in the market and long-term gains for the American people?” Bessent told CNBC Thursday. “I’m not concerned about a little bit of volatility over three weeks.”

Regardless of Trump’s true feelings, the data suggests Americans are more exposed to changes in interest rates than swings in the stock market. While just about six in 10 Americans report owning stock, according to a 2023 Gallup poll, nearly 80% of American households have some type of debt, according to the Federal Reserve. The 10-year yield has fallen roughly 50 basis points since the week before Trump’s inauguration, though it ticked up to 4.30% Friday morning.

“More voters are impacted by interest rates than the S&P,” political strategist and venture investor Bradley Tusk told Fortune. “But inflation dwarfs both of them.”

It’s clear markets are no fan of tariff uncertainty, though stocks bounced back a bit Friday morning. It remains to be seen whether more protectionist measures will result in slower growth, higher prices, both (the worst-case scenario), or neither. Even as many Americans have presumably seen the value of their 401k and other retirement plans drop in recent weeks, there are signs the decline in yields is already having an impact.

Mortgage rates fell for a month-and-a-half before Freddie Mac’s weekly estimate ticked slightly higher Thursday, though the agency said the average rate on a 30-year mortgage has fallen to 6.65% after surpassing the 7% threshold in early January.

“Despite this minor bump, rates are still at their lowest levels of the year and if they continue to fall, could provide a welcome boost as the spring housing market kicks off,” Lisa Sturtevant, chief economist of multiple listing service Bright MLS, wrote in a note Thursday.

Lower mortgage payments may not address the nation’s structural housing deficit, but they could prod homeowners who have felt “locked in” to rates they obtained before borrowing costs spiked in 2022. Mortgage loan application volume increased 11% last week, according to an index calculated by the Mortgage Bankers Association.

Why Trump is eyeing the 10-year Treasury

Long-term yields are highly correlated with the Federal Reserve’s overnight lending rate for banks, which allows the central bank’s decisions to be transmitted throughout the economy. The relationship isn’t perfect, however, because the market for free-floating assets like the 10-year Treasury is also based on other factors, explained Matt Sheridan, lead portfolio manager for income strategies at AllianceBernstein. Expectations for economic growth, inflation, and fiscal policy also play a role, he said.

Yields, which represent an investor’s annual return, fall as bond prices rise—and vice versa. That tends to happen if investors believe the Fed will be forced to cut rates, which makes the higher payments on existing bonds more attractive relative to new debt.

Conversely, if concern about the government’s debt burden increases, investors might demand a higher return. Over the last few months, Sheridan said, fixed-income investors have worried less about the federal deficit and are now more anxious about the economy. Initially, many traders believed Trump would be focused on pro-growth aspects of his agenda like tax cuts and deregulation.

“I think investors were a little bit surprised the new administration is prioritizing tariffs,” he said.

A White House spokesperson said the bond market’s minor rally reflected the new administration’s efforts to restore “fiscal stability and confidence.”

“President Trump has been committed to restoring our nation’s fiscal credibility, which was undermined by the previous administration’s reckless spending,” Harrison Fields, deputy press secretary and special assistant to the president, said in a statement.

Marko Papic, chief strategist at BCA Research, said it’s wrong to suggest Trump wasn’t willing to look past equity volatility during his first term. After all, despite the president citing the stock market’s performance every 35 hours during his first year and change in office, per Politico, the S&P 500 declined 6% in 2018 as Trump launched a first trade war with China.

“President Trump tweets about the stock prices when they go up,” Papic said, “and he doesn’t when they go down.”

Some demographics that tend to have lower exposure to the stock market have also appeared to gravitate to Trump, who bested Harris and his own 2020 performance in November among voters without a college degree and those making less than $100,000.

“They probably don’t care about the stock market, but they [also may not be] in the market to buy a new home,” said Tusk, who served as campaign manager for former New York City mayor Michael Bloomberg.

“But what they do do is buy groceries,” he added, “or they might want to buy a new truck.”

Auto loans aside, that’s why inflation and potential price increases from tariffs, he said, are the economic issues that loom largest.

This story was originally featured on Fortune.com

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Tech News

The founder behind $3 billion beer giant Samuel Adams dropped out of Harvard because the school of life taught him more about entrepreneurialism

Published

on

By

Mark Zuckerberg isn’t the only entrepreneur who ditched Harvard in pursuit of something bigger. Samuel Adams founder Jim Koch built a $3 billion alcohol empire, but it wasn’t the Ivy League school that set him on that path. 

It was 1978, and Koch had just completed his second year of Harvard Business School’s JD/MBA program. He said the program allowed students to do law school and business school at the same time, and often led to a career as a corporate lawyer or working for a big company. But by the end of his second year, Koch was questioning if that path was truly for him.

“I’ve been going to school since I was five years old,” Koch said of the dilemma in an interview with Fortune.  “I’ve never really done anything in the real world and yet, I’m on this path leading me to a place I’m not sure I want to be.”

His push to explore the world and get hands-on experience ended up leading him on the path to founding Samuel Adams. But now looking back, Koch realized that one crucial skill he learned while building the company isn’t even found in a textbook at Harvard.

How to sell a company 

Koch’s path towards success didn’t start in the classroom. In fact, he said that the selling skills he learned aren’t even taught at Harvard. The Ivy League institution offers students courses in marketing, sales management, and business analytics, yet a course on basic selling tactics is nowhere to be found. 

“Selling is this really, really important skill that business schools don’t teach to this day,” Koch said.

It’s a skill he had to learn on the ground—literally. When Koch launched Samuel Adams in 1984, he couldn’t find a distributor who would agree to sell his beer. Which meant he had to sell it himself.

Armed with a family recipe and a dream, the then 34-year-old set out walking door-to-door with a briefcase of beer, hoping to convince bar owners and managers to stock the brew. In one briefcase, he could fit seven beers, two ice packs, and a sleeve of cups for sampling. Koch says he had “about a 5% success rate,” meaning for every 20 bars he visited, he’d open one new account. 

“If I didn’t go from bar to bar with the cold beer in my briefcase and get people to carry it, I was going to go broke really quickly,” he said.

The determination and door-knocking paid off: Samuel Adams launched with an investment of $140,000 and two employees before skyrocketing into a $3 billion business over the course of 40 years. The decades-old brand is staying modern too: Koch expanded his alcohol empire under the umbrella of Boston Beer Co. to include bar favorites like hard seltzer brand Truly, hard iced tea brand Twisted Tea, and hard cider brand Angry Orchard.

Now, four decades later, Koch is sharing his biggest business lessons, and wants entrepreneurs to understand the importance of one core function that may seem obvious: selling. 

“Nobody goes to college because they want to be a salesman,” he said. “It has a negative connotation.”

Citing pop culture classics like The World of Wall Street and Death of a Salesman, Koch explained that in pop culture, particularly among white-collar and educated workers, “salespeople are portrayed as kind of sleazy.”

“But what I learned is, done right, it’s a very noble activity,” he said, adding that exemplary salespeople demonstrate how their products can help consumers with their daily lives and goals. Conversely, salespeople shepherding “crappy,” non-beneficial products are “charlatans.” 

“People are too smart to be fooled like that,” he said. “So to me, selling is not only necessary but noble.”

Success is a mindset

Koch’s path to building his empire wasn’t just hard work, he says: humility was a key building block. He says it’s one of the best pieces of business advice he ever received—and it came from his grandmother before he departed for Harvard.

She reminded him: “Jim, remember humility is a virtue.”

Approaching business with humility and gratitude for the success that you already have will lead you to a happy and rewarding life, Koch said.

Overall, success didn’t come Koch’s way traditionally. The entrepreneur used hands-on training from running wilderness courses to become a leader, taught himself how to sell when Harvard didn’t, and kept his grandmother’s words on humility in his head as his success grew. 

Now, Koch helps pass on what he’s learned to entrepreneurs through his Brewing the American Dream program. 

“I believe that my job as a businessperson is to try to pay forward, share the wealth, however you want to say it, because at the end of the day if you’re the only person who benefits from your success, you’re not going to have much of it.”

The program helps entrepreneurs with two things Koch didn’t have access to when he started Samuel Adams: loan money and coaching and counseling advice. While partnering with the ACCION opportunity fund, the program makes loans to businesses that no bank is going to touch. Koch says they look at the passions of the entrepreneurs and the quality of their products.

He says the program has a repayment rate of about 98%. And since then 2008, they’ve made $110 million in loans to 4,300 companies, provided coaching and counseling to around 20,000 companies, and those companies have saved or created almost 12,000 jobs in their communities.

This story was originally featured on Fortune.com

Continue Reading

Tech News

China is ‘laughing’ at the U.S. trade wars and has the most to gain from Trump’s ongoing European tariffs, top diplomat says

Published

on

By

  • EU foreign policy chief Kaja Kallas told Bloomberg that China is the country that stands to benefit the most from a trade war between the U.S. and EU. Her comments come as the EU imposed 50% tariffs on American whiskey in retaliation for U.S. tariffs on steel and aluminum imports.

The only country benefiting from a trade war between the U.S. and the European Union is China, according to EU foreign policy chief Kaja Kallas.

Kallas, who until last year served as the first female prime minister of Estonia, said in an interview with Bloomberg that China is “laughing” at the tariff squabble.

“Who is laughing on the side or looking at the side is China,” Kallas told Bloomberg during a G7 meeting in Canada. “It’s really benefiting from the U.S. having a trade war with Europe.”

After the U.S. imposed a 25% tariff on any imported steel and aluminum, the EU struck back with a 50% tariff on American whiskey. In response, President Donald Trump threatened a 200% tariff on EU-imported alcohol like champagne and wine. 

On Thursday, Trump stood firm on his threat, telling reporters he will not reconsider upcoming tariffs that go into effect on April 2. He called on the EU to drop its tariffs on American whiskey or face reciprocal tariffs.

“I’m not going to bend at all,” he said.

Meanwhile, Kallas said the EU would also not back down from a tariff fight.

“We keep a cool head and of course we are ready to act and defend our interest when we need to,” she said.

A spokesperson for China’s foreign ministry, Mao Ning, said during a press conference Friday that she would not comment “on how the U.S. and Europer get along,” but China was not at issue. 

“There will be no winner from a trade war or tech war,” she added.

Canada also hit the U.S. with billions of dollars of reciprocal tariffs in retaliation for its steel and aluminum tariffs, an action Commerce Secretary Howard Lutnick called “tone deaf.” 

The latest escalation between the U.S. and EU comes as the U.S. stock market fell into a correction Thursday, with the S&P 500 falling more than 10% below the all-time-high it hit just three weeks ago. Uncertainty about tariffs and the threat of a recession have spooked investors, and the Atlanta Fed now predicts the U.S. GDP will decline by 2.4% in the first quarter.

This story was originally featured on Fortune.com

Continue Reading

Tech News

How Jump and Solana vets are building a hyper fast internet for blockchains

Published

on

By

High-frequency traders are the whiz kids of Wall Street. They either code scripts to execute quick trades to eke out small profits that, multiplied by one or ten thousand times over, result in serious cash. Or they’re able to act milliseconds faster than competitors to score big bets on market swings. Speed is paramount, which is why HFT traders have created their own private networks of internet cables—now, a crypto project called DoubleZero wants to do the same to speed up blockchains.

“We can use a whole different set of technologies that have basically been standard and de facto in the high-frequency trading world… but are not available over the public internet, so they’ve never been applied to blockchain before,” Austin Federa, cofounder of DoubleZero and a former executive at the Solana Foundation, told Fortune.

Federa’s project, which has the same obsession with speed as the firms in Michael Lewis’s famous HFT book Flash Boys, has already attracted capital. DoubleZero Foundation, one of the entities behind the project, announced in early March that it had raised $28 million in a seed round led by marquee crypto investors Multicoin Capital and Dragonfly Capital. Other venture capital firms that contributed were Foundation Capital, Reciprocal Ventures, DBA, Borderless Capital, Superscrypt, and Frictionless. In exchange for their cash, investors received token warrants, or promised allocations of a yet-to-be-launched cryptocurrency, Federa said. 

CoinDesk Solana or Ethereum are like Amazon Web Services or Google Cloud—but decentralized. 

And like any cloud computing network, blockchains have physical servers that process users’ transactions and run programmers’ apps. Currently, when servers that power the Solana blockchain, for example, need to communicate with each other, those signals run over public internet infrastructure, said Federa. DoubleZero aims to create a private network of cables to speed up a blockchain’s processing power.

Jump Crypto, the digital assets subsidiary of HFT firm Jump Trading, and Malbec Labs are the engineering entities behind DoubleZero. They won’t be laying down physical cables to construct the network, said Federa. Not yet, anyway. Rather, the company is cobbling together underutilized bandwidth from HFT firms, private companies, and even individuals to build out a faster physical network of cables than what is currently available for blockchains.

And to make sure that, just like a blockchain, this physical network is decentralized, Federa’s foundation plans to launch its own cryptocurrency to reward those who contribute bandwidth to the project.

Federa’s other cofounders are Mateo Ward and Andrew McConnell. Ward is the former CEO of Neutrona Networks, a portfolio company of Jump Trading that specialized in building private internet networks. And McConnell was a former top engineer at Jump.

This story was originally featured on Fortune.com

Continue Reading

Trending

Copyright © 2024 NewsBiz.online