No matter. On Thursday, markets continued to soar. “It’s not a bull market or a bear market, it’s a Trump market,” says Yale professor Jeffrey Sonnenfeld, though he adds there are signs that financial markets are “starting to call Trump’s bluff.”
Traders are trapped, like all of us, in Trump’s world. It’s a bizarro twist on the “boy who cried wolf” dynamic, Armstrong says. “At what point do the villagers say, ‘This kid’s full of shit’ and he gets eaten by the wolf? Well, if the boy who cried wolf had the nuclear codes, the villagers would be forced to keep listening to him forever. The president is an office of terrible power, and that will never stop being true.”
That’s made life difficult for the denizens of Wall Street, even as some cash in on the war-time volatility. “This is a trader’s wet dream,” says the Wall Street insider. “Volatility is really good if you’re a trader. I guarantee Goldman Sachs and all the trading desks are making money hand over fist.”
But it also means “more headaches, more hours, more nerves,” the hedge-funder says. “If you can figure out the number of Xanax prescriptions per trader, that’s definitely gone up.”
This new dynamic also presents a moral dilemma for a cohort not known for its high ethical standards. If Trump responds only to markets, backing down when the Dow takes a dive or Treasury yields spike, inoculating stock prices against his erratic behavior could mean emboldening him. Full speed ahead.
Putting aside the moral quandary, appeasing Trump carries with it pecuniary risks: “Emboldening him now only increases the odds of a negative tail-risk later,” says the financier. “Because the more you embolden this kind of behavior, you don’t punish the behavior, the fewer consequences there are for this kind of behavior, the higher the odds are that in the future, [Trump’s] going to do something that rips your face off.”
