Are Markets Tuning Out President Trump?

Are Markets Turning a Deaf Ear to President Trump?

After weeks of getting whipped around by the latest tariff related news markets seem to either ignoring the latest reports or just taking a breather from headline overload.

Take the latest headline news where President Trump threatened to impose 25% tariffs on cars, drugs and chips by April 2.  The headlines were met by markets with a collective yawn, which was a marked change from the frenzied reactions in the first weeks of the Trump presidency.

So, the question to be asked is whether markets are tuning out President Trump?

While it is too early to tell, there are some explanations that are worth exploring:

Perhaps traders and even news trading algos are just plain tired of getting whipsawed by the flood of tariff related headlines?

Perhaps traders are taking a cue from the performance of stocks, such as the DAX, which are showing little concern as they set new record highs?

GER30 Daily Chart

Perhaps traders are looking at U.S. bond yields, which have backed down despite a risk of higher inflation if tariffs were levied as the president has threatened.

Perhaps it is the USD, which has retreated from initial tariff inspired highs.

Perhaps markets see Trump’s threats as a negotiating strategy designed to exact concessions from U.S. trading partners. This would be easier to interpret if the goals were clearly stated rather than jumping from threatening reciprocal tariffs to blanket levies across the board.

Or perhaps there is a simpler explanation.

As I wrote in Should Traders Take President Trump at His Word?

Markets, meanwhile, seem to be betting on logic and hope that the situation does not escalate into a trade war. So, this would be the surprise for those taking a more optimistic view.

For traders, remember that actions speak louder than words even though markets seem fixated on news headlines awaiting the end game to play out.

If this proves to be the case, then look beyond the treats and to the actions around the deadlines President Trump cited for each of his tariff threats.

In any case, logic suggests no one wants a trade war. However, when playing a game of high stakes chicken there is always the risk of escalation and unintended consequences.

So, let’s not assume markets are tuning out President Trump but biding their time and waiting to see what actually unfolds. In the end. it will be what actions are actually taken rather than what words precede it.

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