In a Rush of Social Media Hype, Trump's Hidden Hero Moment on the Stock Market
Stocks Offer Trump an Exit Strategy; Decision Lies with Him Now
Wall Street just caught a glimpse of a powerful force that, if wielded skillfully, can shift the stock market's tides: the President's voice. In the bustling world of stock trading, a false rumor ignited a brief, yet instructive, surge of optimism in a crashing market. If the president's ear is tuned to the right frequency, it could mean the difference between stormy seas and calm waters for Wall Street.
On Monday, the global economy was sent trembling, trying to make sense of the devastating blow delivered by Trump's self-inflicted tariff turmoil. On Wall Street, the major indexes plummeted more than 3%, sliding into what is known as bear-market territory - a 20% drop from their peak just seven weeks prior.
The day seemed destined to continue draining market value, in response to the previous week's tariff announcement.
But then, even before the market had a chance to catch its breath, stocks staged a breathtaking about-face, skyrocketing a whopping 8% in mere minutes. (This kind of volatility is not what you'd expect on a typical trading day.)
The sudden surge into positive territory was swift, and it had an air of mystery about it. Its origins can be traced back to an unsubstantiated rumor suggesting a possible three-month tariff delay. The originator of this headline remains unclear, but it's believed to have originated from a small account on social media platform X, although it hadn't been confirmed as of Monday evening. Eventually, the headline found its way to a CNBC chyron.
Traders, seeking a glimmer of hope, seized the opportunity and promptly bought into the rumor. The brief respite from the bloodbath indicated that, should President Trump choose to delay tariffs, the corporate world could be given a reprieve to adjust their supply chains to the changing landscape. Even a hint of a willingness to negotiate with trading partners could help alleviate some of the losses.
Unfortunately, the cavalry of sanity wasn't coming just yet. With the White House already being blamed for the market downturn, there seemed to be little point in reversing course at this stage, according to Mike O'Rourke, chief markets strategist at Jones Trading.
The White House, as promised, has pressed on with its tariff agenda, causing Wall Street to reconsider its expectations. According to O'Rourke, investors are now grasping that the administration is committed to seeing through its tariff plans. But the near future looks bleak, as corporations prepare to report their earnings, and there's not much to look forward to beyond the possibility of a trade agreement that will provide a way forward.
The White House's inconsistent messaging on tariffs isn't helping much in managing investor expectations. While Commerce Secretary Howard Lutnick and White House trade adviser Peter Navarro reinforced the news about the tariffs to various media outlets over the weekend, President Trump himself hinted at a willingness to negotiate with tech executives and world leaders on Sunday. Reports suggest that the Trump administration is in active discussions with Israel, Vietnam, and India regarding potential trade deals.
Wall Street is making its wishes clear: stay the course, Mr. President. Stocks are now cheaper than they were a week ago, which might tempt investors to dive back in. However, indulging in "dip-buying" might inadvertently reward Trump for playing a dangerous game with the global economy. Sometimes, to get a dog to stop peeing on the rug, you have to let it get a little wet.
"We need this market to crash - to keep the pressure on the administration," Ed Yardeni, president of Yardeni Research, told my colleague Matt Egan on Monday. Such a candid comment from an analyst as prominent as Yardeni, who also boasts a Ph.D in economics from Yale, is a strong statement indeed, serving as a clarion call for the White House to heed the warning.
### Insights: Tariff Impact on the Stock Market Strikingly, President Trump's potential delay of tariffs can have significant effects on the global stock market. The delay or pause of tariffs can lead to market relief as investors anticipate reduced trade tension and potential economic instability. When stocks respond to rumors of a tariff delay, they may experience short-term gains, increased confidence, and a reduction in volatility, provided the delay does not merely postpone economic challenges. In the competitive world of Wall Street, every move matters, and a president's words can either calm or storm the stormy seas.
- The potential delay of tariffs announced through unsubstantiated rumors can have a significant impact on the stock market, as demonstrated on Monday when stocks surged after a rumored three-month delay was reported.
- In the competitive world of business and stocks, every move by the president, such as a hint of a willingness to negotiate tariffs or delay their implementation, can either alleviate risks and calm the market or cause devastating effects, as witnessed by the plummeting of major indexes on Wall Street due to the self-inflicted tariff turmoil.
- If the president chooses to delay tariffs, it could provide a reprieve for corporations to adjust their supply chains and alleviate some of the losses, but indulging in dip-buying, or investing based solely on the rumor of a tariff delay, could inadvertently reward risky behavior and potentially lead to devastating consequences in the long run.
