Is #特朗普税改 starting to release messages again? Let's analyze it simply: Trump is eager for the Federal Reserve to cut interest rates to keep long-term U.S. Treasury yields below 4.5%. However, the Federal Reserve Chairman completely ignores Trump. Trump is now continuing tax cuts to fulfill election promises, while also waiting for the government to run out of money and shut down, making the situation escalate further.

In short, with short-term debt maturing soon, the Federal Reserve will either cut rates or expand its balance sheet; otherwise, the government will shut down. It happened once in 2020, and the Federal Reserve later also expanded its balance sheet to solve the problem. However, this time the situation is different from last time; last time was due to a pandemic, and although expanding the balance sheet solved the problem, it led to a double whammy for both bonds and stocks. This time is worse, compounded by the decoupling between China and the U.S., and continuing to cut rates or expand the balance sheet may further exacerbate skyrocketing CPI. Let's see how it goes.