Financial markets showing resilience in the face of persistent geopolitical headwinds. In recent years, former President Donald Trump has raised alarm about many of these issues with his unpredictable and unconventional use of tariffs. Analysts and investors will note that whenever Trump goes out with such loud threats they almost always cause panic in the markets. This time, a lot of folks think investors might be getting made weary by his shenanigans.
What has caught on is the phrase “Trump Always Chickens Out.” It perfectly encapsulates the former president’s habit of retreating from his own brashly applied tariff policies. This is not the least bit surprising, as this characterization has most certainly ruffled Trump’s feathers. Perhaps more than any other time, investors are at ease this time compared to previous years. Many analysts suggest that the former president’s history of threatening steep tariffs and policies has conditioned the market to expect eventual easing or postponement after periods of heightened volatility.
New analysis By Hugh Dive, chief investment officer at Atlas Funds Management, makes clear the gravity of this longrunning trend. “Winding back the alarming headline moves in tariffs has seen subsequent shocks less,” he stated, emphasizing how markets are adjusting to Trump’s policy changes. DIVE has been tracking this trend since the first of the year. It is a harbinger of a broader shift within the investing public.
Markets are responding to the new developments, sending the US dollar index down 0.29%. Meanwhile, yields on the US 10-year Treasury increased by roughly 2bps to around 4.344%. In Japan, 10-year government bond yields were up 1 bp to 1.425%. At the same time, spot gold is down 1.05%, trading at $3,333/oz.
Dan Ives, managing director at Wedbush Securities, said signs are emerging that the market will be able to recover. He is looking for US markets to rally when they open up again. “Some will say the ceasefire will not last but the reality is Iran has limited options and negotiations will now take over which is a positive for stocks,” Ives commented. His comments were issued in the wake of a reported truce. He called it “the most bullish possible outcome” Wall Street could expect.
Aside from Ives’ remarks, Vis Nayar, chief investment officer of Eastspring Investments, commented on the state of affairs. And I would argue in practice that very quickly markets zero in on the fact that the geopolitics here enabled Iran to even consider what their response might be. And I think that de-escalation was probably the most predictable outcome,” he said.
Now, as investors try to digest these surprises, they are growing concerned by the possibility of Trump’s unpredictable hand. Perhaps stakeholders were hoping for a lower degree of volatility than had existed in prior years. This expectation came from the well-documented history of threatened action immediately followed by withdrawal.