Whatever happened to the “Trump put”? Investors are rapidly rethinking the idea Donald Trump would row back on reckless policies once he saw a negative market reaction.
The S&P 500 has suffered a rapid double-digit correction. It fell 5.6 per cent in the first 50 days of Trump’s presidency – the third-worst performance since 1953.
Only Obama (2009) and Bush (2001) did worse, and they took office when stocks were already in bear markets, whereas Trump inherited a raging bull market.
What’s worrying markets is Trump doesn’t appear unduly bothered by investors’ tariff tantrum. He has dismissed the selling of frustrated “globalists”; refused to rule out a 2025 recession; and talked about “a little disruption” and how you “can’t really watch the stock market”, contrasting US short-termism with China’s “100-year perspective”.
Aides and supporters have hit similar notes, with Trump-supporting venture capitalist Chamath Palihapitiya saying to go “long Main Street, short Wall Street”.
Already, says Apollo’s Torsten Slok, uncertainty among US small businesses is near the highest levels since surveys began in the 1970s. More uncertainty means lower valuations; the S&P 500’s forward price-earnings ratio has decreased from 25 to 20 since January, notes veteran money manager Richard Bernstein.
Markets are learning that 2025 is not 2017. Trump 2.0 is a different beast from Trump 1.0.
