Trump’s three market barometers to watch: Long yields, U.S. dollar and oil

Posted By: EN Todayon: February 19, 2025In: General Energy News, Oil & Gas News

There’s a new scorecard by which to measure President Donald Trump ‘s economic prowess, according to Gavekal Research. Roughly one month into Trump’s return to the White House, the president’s economic goals are taking shape, notably across three key measures that have been elevated: long-dated Treasury yields, the U.S. dollar and oil prices. Theoretically, a suppression across those three measures should drive a surge in U.S. economic growth, which is what Trump is seeking, but that could be more challenging than anticipated, wrote Louis-Vincent Gave, CEO at Gavekal Research. “These three goals are understandable. An environment of low yields, low energy prices and a weaker US dollar would unleash a US economic boom, and a global boom, of epic proportions,” Gave wrote on Tuesday. “However, one does not always get what one wants.” Here is how achievable they could be, according to Gave. 1. Keep long-dated yields lower A rise in long-dated Treasury yields, which raise the borrowing costs for home and auto loans, could theoretically be curbed a number of ways by the Trump administration, through government spending cuts implemented by the Department of Government Efficiency (DOGE), or by potentially issuing asset-based securities. However, elevated inflation, and a rise in geopolitical tensions, could foil the Trump administration’s hopes for lower Treasury yields. The 10-year U.S. yield was last hovering above 4.5%. 2. Weaken the U.S. dollar The U.S. dollar is likely at the “top of its range,” according to Gave. It’s already been on the decline since Trump was sworn in last month, Gave noted, and will likely soften further with Treasury Secretary Scott Bessent intent on forcing revaluations on Northeast Asian currencies such as in Japan and Korea. 3. Lower oil prices Trump could accomplish his goal to bring energy prices down, should he succeed in bringing Russia back into the G8 and coordinating peace talks with Ukraine, as well as cutting regulatory costs for oil and gas companies. However, with rising pressure on Iran, and China demand for oil spiking, energy demand could actually surprise to the upside this year, Gave said. “If the Trump administration gets the three economic things it wants—falling US treasury yields, a weaker US dollar and lower energy prices—then the whole world will boom, and the assets that are priced for delivering little or no growth will get rerated most aggressively,” Gave wrote. “On the opposite side of the ledger, if the Trump administration fails in each of these three tasks, and we end up with higher yields, a stronger US dollar and higher oil prices, there are probably few things investors will want to own except short-dated US treasuries, and perhaps gold and energy stocks.” “”The first outcome is a global deflationary boom scenario. The second is a global inflationary bust scenario,” Gave said. “One is undeniably more fun than the other.”