The president needs lower gasoline prices and mortgage rates - fast
This is probably a good moment for investors to take some profits from their energy stocks, which have been booming since the Trump administration launched its attack on Iran six months ago, and to add some money to their bond funds, which have been in the tank.
At the very least, this may be a great time to do some so-called rebalancing, which means selling recent winners and buying losers to restore the target-balance allocation in your portfolio.
The reason? Politics.
With the midterm elections just two months away, President Donald Trump and the Republicans are in trouble. To turn things around, the president wants to get fuel prices and interest rates down, and fast. And that will be bad news for energy stocks and good for bonds.
To give you an idea of how bad the political picture looks: Trump's public disapproval ratings are now about as bad as Richard Nixon's were when he had to resign in disgrace in 1974.
These are hard numbers. Rasmussen Reports, which is typically a Republican- and Trump-friendly pollster, says that this Labor Day, about 45% of Americans "strongly disapprove" of Trump's job performance.
Rasmussen didn't exist back in the 1970s, but veteran polling company Gallup did. And in August 1974, as the Watergate scandal reached its end, Gallup found that 46% of Americans "strongly disapproved" of President Nixon's performance.
Yikes.
You have to figure Trump doesn't want his party to get smoked and lose control of both houses of Congress.
And he surely doesn't want to spend his last two years in office as the lamest of ducks, facing congressional inquiries into his family's crypto dealings, getting impeached and unable to get anything done.
There are plenty of factors involved in this polling. But a key one is surely the economic fallout from the Iran war, which - despite Vice President J.D. Vance's latest gaffe - still looks and sounds like a war.
Check out what's happened to mortgage rates, gasoline prices and diesel prices since the start of the Iran adventure at the end of February.
The interest rate on new 30-year mortgages was below 6% in February. Now it's closer to 7%. Gasoline prices are a disaster. And what about diesel prices?
The Teamsters union all but endorsed Trump for president two years ago. I wonder how its members feel about the situation now?
I emailed them to find out. When the phone didn't ring, I knew it was them.
(Funny, back in 2021, when the Teamsters were shaking down the taxpayers for a massive bailout of one of their pension funds, they couldn't wait to get on the phone with me. But I guess that was then, and this is now.)
Let the record show I'm the son of a Teamster.
Meanwhile, check out the performance of energy stocks and longer-term bonds during the war.
The good-ish news for Trump and Team MAGA is that the president can actually do quite a bit to move fuel prices and mortgage rates pretty quickly.
On energy prices, the president can just announce the war against Iran is over, say America "won," and stop the bombing. "Declare victory and come home," as the phrase has it.
It doesn't matter what that victory looks like, or if it even exists. Like the conflict in the classic movie "Wag The Dog," it doesn't really matter - politically speaking - if the story is true. It just has to hold until election day.
Even if "victory" means Iran ends up charging a toll for every oil tanker passing through the Strait of Hormuz, that will end up a lot better for U.S. energy prices than if no oil tankers pass at all.
Just the illusion of peace can go a long way in markets. When the president declared victory in the spring, Brent crude oil (BRN00) prices fell from $118 a barrel to about $70. (They're back at $96.)
As Conrad Brean - played by Robert De Niro - in "Wag the Dog" might have put it: Of course there's peace. I'm watching it on television!
What about bonds and interest rates? Well, just declaring peace would be a help. If energy prices fall, worries about inflation will follow suit. That alone will boost bond prices and drive down interest rates. (Bonds are like seesaws: When their price rises, their interest rate falls.)
A Trumpy Federal Reserve can go further by relaunching quantitative easing, the policy of printing money and using it to buy up Treasury bonds. (Republicans used to denounce QE, so they will probably want to come up with a new name so they can pretend they aren't pursuing the same policy.)
Some shrewd and heterodox market commentators already reckon a return to QE is inevitable - not only to bring down interest rates, but also to help the federal government manage the interest bill on its insane and rising debt.
Maybe the U.S. Treasury can buy up Japanese bonds and the Japanese government can buy up Treasurys? One palm greases another, as they say.
So a declaration of peace and a new campaign of Treasury purchases could surely help Republican fortunes in November. How much they'd help, and whether it's already too late, are unknowable. But unless Trump wants to spend the next two years in misery, it might be worth it to try.
-Brett Arends
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