Markets Bending to Trump's Will: A Recklessness Unchecked

Strategic Insights -

As the US presidency of Donald Trump entered its second year, a group of "stock vigilantes" was expected to curb his wild economic impulses by keeping a close eye on the markets. However, since Trump abandoned tariffs in April, investors have become complacent, disregarding policy pronouncements that should have sent them running for cover.

Key Takeaways:

  • The US stock market has become more concentrated than ever, with a handful of companies dominating the indices. One CEO has secured favorable treatment from Trump after a personal meeting in the Oval Office.
  • Trade taxes are in disarray, with agreements with major partners lacking in substance and being imposed based on Trump's personal preferences.
  • The president has fired the head of the Bureau of Labor Statistics due to dissatisfaction with employment data and has publicly attacked the Federal Reserve chair, Jay Powell.
  • Trump's latest pick for the Federal Reserve, Stephen Miran, has proposed a "fundamental overhaul" of the central bank, suggesting at-will removal of board members and Reserve Bank leaders.
  • US 401k savings plans have opened up to cryptocurrency, further eroding traditional investor safety.
  • Volatility remains low, with US stocks trading at record highs, government bonds steady, and the dollar declining gradually.
  • Economist Paul Krugman and others are questioning why stock markets are not reacting to the perceived policy recklessness.
  • Investment banks and asset managers are pushing back against uncertainty narratives, arguing that the economic policy is sound.

Statistics:

  • US stocks indices have risen by 9% this year, defying expectations of a downturn.
  • German stocks, measured in dollars, have increased by 35% this year.
  • The dollar has declined gradually, reaching a new low.
  • The Bureau of Labor Statistics has reported uncertain employment data, prompting the president to fire its head.
  • 401k savings plans currently allow investment in cryptocurrency, a shift from traditional fiat-based savings.

Sources:

  • Katie Martin, "Markets bending to Trump's will", Financial Times (2025)
  • David Zervos, "The Macro Intelligentsia Crowd and the "Hoax" of Uncertainty", Jefferies Research (2025)
  • Paul Krugman, "Policy has gone mad; why aren't stocks down?", The New York Times (2025)
  • Stephen Miran, "A Fundamental Overhaul of the Federal Reserve", paper presentation, Federal Reserve (2025)