Hassett serves as Trump’s director of the National Economic Council. His role largely involves reiterating the administration’s preferred narratives.
He has expressed the possibility of future trade agreements. Ultimately, any decision regarding these will be made by Trump.
The Fed’s Path and Market Implications
We shouldn’t focus on what administration officials say about Federal Reserve policy. The real signal comes from the top, which creates a lot of noise and potential pressure on the central bank. Given that the latest CPI reading is still hovering just over 3% while Q2 GDP growth came in at a sluggish 1.5%, the Fed’s path is genuinely uncertain.
This suggests we should look at options on interest rate futures, as implied volatility is likely to rise ahead of the next FOMC meeting. The market is pricing in rate cuts that the Fed’s own data might not support, creating a clear discrepancy to trade. We saw a similar dynamic back in 2019, when public pressure from the White House often preceded market volatility around Fed decisions.
More trade deals may be on the way, but the path to get there will likely be erratic and driven by one person’s decisions. We’ve already seen this in the first half of 2025 with new tariffs placed on certain goods from Southeast Asia, which contributed to a 4% decline in U.S. exports to the region last quarter. This unpredictability is the key factor to watch.
Strategies for Market Volatility
The best response is to hedge against sudden swings in specific sectors, like industrials and technology, which are sensitive to supply chain announcements. The VIX has been elevated, averaging around 21 for the past month, suggesting the market is already pricing in this political risk. Buying protection through puts on relevant ETFs when the VIX dips could be a prudent strategy.
