Kiwoom Securities analyzed on the 12th that suspicions regarding U.S. President Donald Trump intentionally leading the U.S. stock market downturn could be a strategic move to ease the burden of government bond interest payments and secure victory in the midterm elections.
The Standard and Poor’s (S&P) 500 Index and the Nasdaq Index fell by 11% and 14%, respectively, from their highs this year. The sharp decline in the stock market began with remarks made by U.S. Treasury Secretary Scott Bessent. He said, “The Biden administration is addicted to government expenditure, and now the economy needs a detox period.”
President Trump also responded to a question regarding the possibility of a recession during an interview with Fox News on the 9th (local time), stating that there could be a “transition period.” The market suspects that the Trump administration is intentionally causing a drop in stock prices. It is argued that this is aimed at reducing the burden of interest on Government Bonds and setting the stage for a victory in the U.S. midterm elections in November 2026.
Kim Seung-hyuk, Analyst at Kiwoom Securities, estimated that if bond rates decrease due to the decline in the U.S. stock market, they could reduce interest. Based on the U.S. Treasury’s Monthly Public Debt Report (MSPD), it was analyzed that 72.6% of the bonds maturing this year are concentrated in January to June. The debt scale is approximately $7 trillion (about 1,000 trillion won).
When bonds mature, the U.S. government shapes to refinance (refinancing) along with the repayment of the principal. This means that conducting refinancing in a high market interest rate situation could increase the burden of interest even more. However, with growing concerns about economic slowdown, the yield on the 10-year Government Bonds recorded 4.2% on the 10th (local time), a decrease of 0.6 percentage points from the high for the year.
Analyst Kim stated that “In the absence of an agreement to raise the debt ceiling, it is impossible to increase bond supply, so the possibility of President Trump’s intent to lower interest burdens by raising concerns about an economic slowdown could be reflected at this point.”
Based on the calculations made by multiplying the magnitude of the interest rate cuts for each bond since Trump's administration with the proportion of public debt composition for each bond, it was estimated that there was a saving effect of approximately $3.15 billion (about 46 trillion won) in interest costs in January to June due to the decline in market interest rates. This means that it is possible to save $6.3 billion (about 92 trillion won) on a yearly basis.
There is also the aspect that President Trump may place greater importance on the stock market during his second year in office, taking the midterm elections into account. If correction is essential amid disputes over stock market highs, proceeding in advance may be advantageous during the elections.
Analyst Kim noted, “Starting 2026 with a high valuation could make it difficult for stock prices to continue their upward trend,” adding, “In consideration of the midterm elections, while being mindful of the stock market in the second year, I believe that the desire to refinance bonds at low interest rates may have led to the current portrayal of President Trump as encouraging stock market adjustments.”
However, Analyst Kim evaluated that President Trump’s remarks are based on the belief that the U.S. economy will be robust. He stated, “If the actual possibility of recession is confirmed by economic indicators, the government will halt quantitative tightening (QT) and resume liquidity supply while being cautious with their words.”