The $40 Trillion Bill Traders Are Not Ready ForHow D.C.’s all-nighter and a looming Fed shakeup could reshape markets.
Markets don’t often tell you what’s about to happen. But lately, they’ve been whispering loud enough that anyone paying attention can hear it: change is coming to monetary policy, and you’d better be ready to trade it. Let’s unpack what’s really going on behind the headlines… and how to position yourself before the herd catches on. The Show in Portugal
A few days ago, Jerome Powell appeared on a panel alongside central bankers from the U.K., Europe, Japan, and Korea. The venue was neutral. The tone was diplomatic. But the subtext was clear: every central banker on that stage is feeling the same pressure. Inflation is cooling. The economy is showing cracks. And the tariffs Trump has unleashed, and promised more of, are clouding the path forward. Powell held his line publicly, saying the Fed remains “focused” and “data-dependent.” He wouldn’t commit to a rate cut at the next meeting in July… but he did let this slip: most of the committee expects to cut rates sometime in the second half of the year. So why the wait? Because Powell knows he’s on borrowed time. The Shadow ChairTrump is leaning on Powell harder than ever, calling him “stupid,” ridiculing him in public, and even mailing him a hand-annotated chart comparing U.S. interest rates to 44 other countries. (Yes, really.) Trump wants rates closer to 1%-2%, which would take ten quarter-point cuts from here. Powell is signaling maybe three by next year, and the president clearly sees that as sabotage. What’s more interesting is what came next: Treasury Secretary Scott Bessent openly admitted yesterday that Trump is already preparing Powell’s replacement, and it could be announced “within weeks.” In other words… Powell’s not really in charge anymore. If markets know that Powell’s successor will slash rates to juice the economy, why would they wait to bid risk assets higher? This is why stocks have barely flinched even as Powell “stands firm.” D.C.’s All-Nighter and the Big BillMeanwhile, the Senate spent the night in what they call a “vote-a-rama,” finally pushing through Trump’s “Big, Beautiful Bill.” The bill extends tax cuts, raises defense spending, cuts social programs, and hikes the debt ceiling another $5 trillion.
Elon Musk, who used to chair Trump’s Department of Government Efficiency (DOGE), has now turned on the administration, calling the bill “DEBT SLAVERY” and promising to fund campaigns against any Republican who voted for it. Trump, of course, fired back, threatening to yank government contracts from Tesla and SpaceX. That feud aside, the takeaway for traders is simple: Washington has chosen more spending and more debt. And that means the pressure on the Fed to cut rates, to keep the government’s borrowing costs manageable, is only going to grow. Why This Matters to YouFor traders, this situation is a rare alignment of catalysts: ✅ The Fed has already telegraphed rate cuts by year-end. We don’t get setups like this often, when the next 12-18 months of policy direction are practically scripted, but still underpriced by the crowd. How to Trade the Coming Fed Power ShiftHere are three actionable ideas to position yourself right now: 📈 Buy long-duration bonds selectively. Bonds have been beaten up, but if the Fed cuts, yields come down and bond prices recover. Look at TLT calls or outright positions in 20+ year Treasuries. 🏆 Focus on risk assets with strong trends. The S&P 500, gold, and even bitcoin all benefit from lower rates. Use pullbacks as opportunities to scale into strong uptrends. 🔎 Find the small-cap and cyclical winners. Rate cuts and dollar weakness help smaller, rate-sensitive names. Look for financials, homebuilders, and industrials. I’ll be breaking down specific tickers, levels, and timing in the premium version of this letter. Don’t sit back and wait for Powell to step aside. Markets will move long before he does. Macro Watchlist & Tactical Trade Setups: Fed Power ShiftBecome a premium member to get the full watchlist and trade setups... Continue reading this post for free in the Substack app
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Thursday, July 3, 2025
The $40 Trillion Bill Traders Are Not Ready For
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