June 10,  5:00 pm EST

Last week we had signals from the Fed Chair that they were prepared to cut rates if needed.

That’s all the market needed to hear to fuel a bounce back in stocks.  And that bounce accelerated when the weak jobs numbers report hit on Friday.

This is the “bad news is good news” dynamic.  Souring economic data gives more impetus for the Fed to move.  And expectations for lower rates are fuel for stocks.

So, the market is now pricing in an 80% chance of a rate cut at their Julymeeting. But I suspect that’s not soon enough.

If stocks continue the strong recovery, on the expectation of rate cuts coming down the pike, the likelihood of the Fed actually delivering on rate cuts diminishes greatly.  To put it simply, the better stocks do, the less likely it is that the Fed will cut.  The stock market matters.

Remember, this overhang of concern in markets is less about what’sactually happening in the economy, and more about what might happen (i.e. the prospects that the U.S. economy and global economy may deteriorate IF the stalemate with China continues indefinitely).

I suspect that Trump wants and needs a move from the Fed at their Junemeeting, which is just seven business days away.  The G20 meeting comes later this month (June 29-30) where Trump and Xi are expected to have a sit-down to discuss the trade deal.  With a rate cut under his belt, Trump might feel more compelled to claim victory on the China trade talks and do the deal, giving himself enough runway into the 2020 elections to have a booming stock market and booming economy.

With the above in mind, it makes since for Trump to ramp up the trade rhetoric (and any other threatening rhetoric) ahead of that June Fed meeting (keeping pressure on stocks), in attempt to force the Fed’s hand, sooner rather than later.

This would explain why he called into CNBC this morning.  Reminding everyone of his hardline stance on China (his indifference on hammering them with tariffs indefinitely), is perhaps his way of trying to tame the stock market recovery.  It may sound like a crazy theory (Trump leveraging a monumental trade deal to manipulate Fed policy, in effort to surgically optimize the economic outcome going into the election), but I think it’s happening.  And he’s doing it because he can.  He’s in the driver’s seat.  He has the leverage and he is pulling the levers.

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