Why Did Wall Street Get Trump So Wrong
 |
| The many faces of one man. He will sell anything to the close mind. |
This claim was obviously absurd. Trump has been obsessed with tariffs, which he called “the most beautiful word in the dictionary,” for decades. In his 2018 book “Fear,” Bob Woodward reported that Trump scrawled “TRADE IS BAD” in the margin of a speech he gave after the G20 summit. It makes sense that Trump would see things this way. When he makes sales, whether of Trump University courses or Trump-branded cryptocurrency, he is usually taking advantage of the buyer, and he views global trade through the same zero-sum lens.
It’s widely known that during his first term, the so-called adults in the room thwarted some of Trump’s most destructive whims. There have been far fewer such figures in the Trump sequel, resulting in the wholesale degradation of American governance. The conspiracy theorist Laura Loomer just directed a purge of the National Security Council. Thanks to Elon Musk’s haphazard cuts, employees who once worked to prevent the spread of diseases like Ebola are gone, as are nuclear safety experts. There’s no one in the executive branch willing to publicly push back on Trump’s threats to take over Canada. Somehow, traders failed to recognize that there would eventually be economic fallout from such profound misrule.
“The markets should have put two and two together that if you’re talking about annexing Greenland, Canada, the Panama Canal, you’re probably going to be more radical on trade as well,” said Berezin.
But Wall Street professionals, like so many other ostensibly smart people, refused to see Trump clearly, mistaking his skill as a demagogue for wisdom as a policymaker. “I don’t think this was foreseeable,” a mournful Ackman posted on X on Monday. “I assumed economic rationality would be paramount.” What an odd assumption to make about a man who bankrupted casinos.
Berezin thinks Wall Street still hasn’t come to terms with the cost of the nascent Trump presidency. “I do think that at this point we might have passed the event horizon, meaning that even if Trump backs off from the tariffs, there’s been enough damage done to the U.S. economy, to the global economy, to investor confidence, consumer confidence, that we’re probably going to see a recession regardless of what happens,” he said.
He points out that while public attention is focused on the stock market, there are alarming signs in the bond market. Usually, if stocks go down, so do yields on U.S. Treasuries, because they become more desirable to people looking for a safe place to park money. At least right now, that’s not happening, which he thinks could signal a crisis of confidence in the stability of the U.S. government and the debt it issues.
“If we’re moving to this new world where the U.S. just can’t be trusted, then do we really want to hold a lot of Treasuries?” he said as he sketched out investors’ thinking. “Do we really want to use the dollar as a reserve?” It turns out that there’s a price for taking all the soft power America has accrued since World War II and setting it on fire. Who knew.
Comments