To Save the Bond Market, Stocks May Have to Burn
Facing hard truths, falling equities, and the fight to steady the U.S. economy
We like to think we see the world clearly. But most of us don't.
Our hopes get in the way. Our fears distort things. And our desire for a particular outcome bends reality into something more comfortable. Especially in times of uncertainty, we twist ourselves into knots justifying what we want to believe.
Politics has become a team sport. We defend any action from "our side" and condemn the same action from the other. But the bond market doesn’t care. It’s not ideological—it’s mathematical. Supply, demand, credibility.
The Stoics warned us about this. Marcus Aurelius said it best:
“You have power over your mind – not outside events. Realize this, and you will find strength.”
Before we can control our reactions, we have to see things clearly. And right now, the truth is brutal.
Where We Are Now
Earlier this week, the 20-year Treasury auction flopped. Yields are climbing fast, and the bond market is flashing red. That matters because the U.S. has to refinance a jaw-dropping $9 trillion of debt over the next seven months.
You read that right. $9 trillion.
And here’s the kicker: as yields go up, the value of the bonds already on the books goes down. That’s a big problem for banks, who hold a lot of those bonds. When this happened with SVB in 2023, it broke the bank. If this spiral continues unchecked, we could be looking at something far worse.
We’re no longer on the edge of a crisis. We’re in it.
The Big Beautiful Blunder
So what’s being done about it?
The House just passed what President Trump is calling the "Big Beautiful Bill," and it looks like it will pass the Senate too. But don’t let the branding fool you. It’s a debt-fueled fever dream. The bill cuts taxes, slashes revenue, and pours gasoline on spending. Attempts to shrink the bureaucracy through the Department of Government Efficiency (DOGE) have failed. In short: we’re borrowing more, spending more, and collecting less.
This is how inflation takes hold. And it leaves the Fed in a bind. Jerome Powell has made it clear—rate cuts are off the table for now. That leaves the Trump administration with a brutal choice.
They need to tank the equity market to save the bond market.
Why Stocks Must Fall
It sounds counterintuitive, but here’s how it works.
When equities fall hard, investors get scared. And when they get scared, they go looking for safe havens. That means gold, the dollar, and yes—U.S. Treasuries. As demand for Treasuries rises, their prices go up and yields come down. Crisis averted. For now.
But this isn’t a "why not both" situation. You don’t get a booming stock market and falling bond yields in this environment. One has to bleed so the other can heal. And right now, bonds are gushing.
Which brings us to this morning’s chaos.
A Message, A Tariff, A Panic
President Trump took to his social network and dropped a bomb: a proposed 50% tariff on EU goods and a 25% tariff on iPhones.
Now, let me be clear—this isn’t about being anti-Trump. Every leader has flaws and makes miscalculations. That’s the nature of power. But if we want to lead or even just survive in this environment, we have to assess actions for what they are, not what we wish them to be. Embracing any leader blindly is a fool’s errand. Eyes wide open—always.
Markets dipped immediately. Talk of a renewed trade war flooded the news. Investors panicked. And for good reason. It looked like the opening shot in a campaign to drive equities down and stop the bleeding in the bond market.
Tariffs usually mean higher costs for consumers, lower margins for firms, and uncertainty for investors. So they hurt stock prices. That’s the point.
But there’s a catch.
The market doesn’t entirely believe him.
And why should it?
We’ve seen this movie before. Trump blusters about tariffs, the market reacts, then the policy walks back. The back-and-forth on China. The NAFTA scare. The slapdash renegotiations. This is standard operating procedure. Add to that the shady appearance of tit-for-tat favors—like Vietnam opening up Starlink while Trump eyes a new hotel development there—and it all starts to feel like a shakedown, not a strategy.
Credibility matters. Without it, these threats don’t hold. And when they don’t hold, they don’t help.
Which means yields keep rising.
The Endgame: Escalation
Let’s be clear: there aren’t many good options left.
If bond yields don’t come down, the cost of refinancing our national debt balloons. At this scale, that starts to look like a soft default—or worse. And a default would trigger even higher rates as buyers demand a bigger risk premium.
So if the tariff gambit fails, what comes next?
We may see something even more dramatic. If the markets won’t believe in a trade war, they might believe in a real one. There’s increasing chatter about U.S. support for Israeli action against Iran. That’s the kind of geopolitical powder keg that could send equities into free fall and send bond prices soaring.
Is that cynical? Yes. But it’s also the logic of the market. And in this moment, perception is reality.
How B:Side Responds
We can’t control global policy. We don’t set interest rates or tariffs. But we can control how we react.
At B:Side, we’re doing exactly what we coach our clients to do: stay grounded, stay smart, and stay ready.
Conservative Decisions: We’re not chasing growth for growth’s sake. We’re focused on quality deals, smart risk, and long-term resilience.
Creative Opportunism: Crises always create openings. We’re looking for overlooked opportunities, especially where we can step in and add value.
Communication and Clarity: Our borrowers, bankers, and partners deserve straight talk. That’s why we’re breaking this situation down, early and often.
Customer Service That Holds the Line: When times get hard, service matters even more. We’re doubling down on responsiveness, transparency, and practical help.
We can’t predict the next market move. But we can make sure we’re positioned to handle it. B:Side has weathered uncertainty before, and we know how to navigate tough markets.
Final Thoughts
It would be easy to turn away from all this. To throw up our hands and say, “It’s above my pay grade.” But leadership means looking straight at the mess and walking into it with a clear head.
Right now, the headlines are loud. The stakes are enormous. And the path forward is uncertain.
But clarity is power. Just like the Stoics said: see clearly, act decisively.
As long as we stay honest about what we’re facing—as long as we don’t lie to ourselves about what’s happening or why—we’ll find our way through. Not unscathed, maybe. But still standing. And still pushing forward.
That’s the B:Side Way.