Trump's next moves eyed by markets as tension builds

Earlier today, Button spoke to Reuters about market conditions, and his comments can be summarized as follows:

"There are two paths Trump can go down - he can double down on unpopular trade wars or he can listen to the electorate and change course," said Adam Button, chief currency analyst at investingLive.

That crossroads, in Button's view, captures the market's tension.

One early signal came regarding the potential replacement of Pete Hegseth:

"No, I think he’s doing a very good job."

Trump has made similar remarks before replacing staff, so Button cautioned against taking it as final. He noted that George H.W. Bush fired Donald Rumsfeld the day after the 2006 midterms, largely because of the unpopular Iran war.

Trump also hinted that Hegseth could take the Tennessee Senate seat after its senator became Governor, something doable in January.

Alternatively, Representative Thomas Massie has pledged to start impeachment proceedings against Hegseth, with evidence the votes exist to do so either before or after the new Congress convenes. Many senators will want to reframe their anti-war, America First credentials, and Hegseth is a convenient scapegoat.

However, the removal method matters significantly. If Trump fires him, it would signal he has grown tired of the Iran war and will end it. If Congress removes him, a pro-war President remains in office.

Regarding timing, earlier New York Times reporting about three carriers in the Gulf was wrong. The USS Roosevelt is expected in the Gulf in mid-November, which could be the strike window. There is talk the USS George Washington must leave soon, leaving only a brief overlap.

A comparable dynamic is playing out on tariffs. Congress has lost patience with USMCA and perhaps other tariffs. Action is anticipated either in the lame duck session or early next year.

Trump could still cut deals before that, and reports indicate agreements with Canada and Mexico are near. If he does, it could reduce tensions, but Congress may still seek to repeal tariffs to show they are fighting to lower the cost of living.

A Trump repost worries Button: if the president doubles down on his worst instincts, it will keep inflation high, complicate the Fed's work, and likely lead markets to price in larger Democratic gains in 2028.