Short answer? Yes.
To say financial markets are “acting weird” would be an understatement. Oh, and in case you wondered, being “played” also means being “jerked around” and even (gasp) manipulated. But as sinister as that sounds, it may not be a bad thing.
In case you have just returned from a distant planet (or are an air traffic controller at Newark airport and lost all communication) and just realized Trump is the President of the United Sates, realize things are “different.” Really different. The President has set out to “remake” global trade as well as make the U.S. less dependent on foreign countries (allies and foes alike) for almost everything. Meaning bringing jobs home. Create the “Golden Age of America.” Hence, MAGA (Make America Great Again).
Well, as you might imagine, that’s going to be an extremely tough and disruptive chore. How to begin? The cornerstone of Trump’s agenda is…..tariffs. Once again, as you might imagine, there is controversy. I know, Trump surrounded by controversy. Imagine.
Without getting immersed in all the love/hate drama around Trump, let’s keep this simple. Trump supporters are certain tariffs will work and all will be great. Trump detractors are just as certain tariffs will bring inflation, higher interest rates, chaos and a global recession/depression. Pretty cheery.
Those two diverse opinions have created turmoil in the financial markets.
- Tariffs announced or increased…markets drop.
- Tariffs rolled back or eliminated…markets rally.
The really “fun” part is you never know when Trump makes those decisions. Hourly? Overnight? Either/or, financial forecasting is almost impossible.
But wait. What if the chaos is part of a plan? Let’s assume Trump is not dumb. Yeah really. I mean, no matter what “side” you are on, he is a billionaire and President (which eliminates all of us). Additionally, he does have a lot of very smart people around. So, after years of pumped up assets and a strong bull market, even Trump knows that some of his polices may trigger a market sell off and severe recession. He can’t let that happen.
The Fed has proven to be sort of a flop in forecasting and actually managing monetary policy. Dot plots and data are rear view mirrors. The only policy they know is if economic conditions turn sour, they lower interest rates, pump lots of money into the system and hope. I’ll be gentlemanly and not mention the “inflation is transitory” (oops) era. But one thing “good” came of it. The “Fed put”.
Again, keeping it simple. Should the financial markets look like they may collapse, it was/is expected the Fed would step in to inject funds and hold markets up. The “Fed put”. It was/is very costly and responsible for a whole lot of unintended consequences. But what if there was a “Trump put?”
A “Trump put?” Follow closely here.
Suppose the administration would welcome a softening economy to reduce inflation, reduce spending, lower housing costs, etc BUT have no recession.
HOW? Create economic uncertainty.
- People pull back on spending and become more cautious.
- Inflation eases but the economy stays relatively strong.
HOW (again)? Announce 50% (+/-) tariffs.
- Markets sell off, scaring people BUT before markets sell off too much, cut/reduce tariffs.
- Now markets rally. The “Trump put.” No cost either like the Fed put. Trump uses the “bully pulpit” to “influence” financial markets.
So are investors and financial markets (globally) being “played?” Probably. Is the “Trump put” a reality? Only a select few know for certain. Is the “Trump put” a good thing? Time will tell.
In any event, get used to being “played.”
Bill Taylor is the CEO and Chief Market Strategist at Digital Wealth News, offering expert insights on markets and asset classes. A proud Horned Frog and Texas Christian University grad, he played college basketball while there. With a strong finance background and passion for digital innovation, Bill shares thought leadership on market trends and portfolio strategy.
