Trump is criticizing Powell and the Federal Reserve for high interest rates that are hurting the housing market. He believes these rates make it tough, especially for young people, to buy homes. He views Powell as one of his worst choices and claims the Federal Reserve isn’t taking action. Trump argues that the US economy is doing well with low inflation and recommends a 1% interest rate to save one trillion dollars each year.

Market Response and Strategies

Despite Trump’s comments, other policymakers have not shown interest in changing their approach. The financial markets are stable, with no signs of a possible rate cut in July, apart from Waller’s remarks. We should consider the political talk as just that: talk. The market’s stability, shown by the VIX index staying below 15 for most of June, indicates that experienced traders are focusing on data rather than drama. Our strategy should stay rooted in economic facts and Federal Reserve signals, rather than political statements. The claim of “VERY LOW INFLATION” isn’t backed by the central bank’s data, so we shouldn’t base our trading on it. Although the May Consumer Price Index dropped to 3.3%, it’s still much higher than the 2% target that policymakers aim for. Therefore, we should not expect any major rate cuts until the data shows a consistent downward trend towards that target. High interest rates are indeed straining the housing market, creating pressure that could lead to changes in policy. With 30-year mortgage rates near 7% and existing home sales declining, we see clear signs of weakness. This makes options on homebuilder ETFs a smart way to respond to potential changes in sentiment or unexpected economic data in the coming weeks.

Focus on Federal Reserve Actions

Traditionally, the Federal Reserve has resisted political influence to maintain its credibility, and we expect this to continue. In June, their meeting showed that the median forecast now suggests just one rate cut this year, down from three in March. We need to base our trades on the committee’s actions, not on what politicians want. Given the current situation, our derivatives strategy should concentrate on volatility and the nuances from Fed speakers. Since implied volatility is relatively low, purchasing options to guard against a hawkish surprise or to position for a potential dovish shift from influential speakers could be wise. We will closely monitor Fed Funds futures for any changes in expectations following key board members’ speeches. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now