Sounds crazy, but at first markets really thought Trump was bluffing about upending the global trade and tariff structure even as that, and more potent, kind of sabre rattling catapulted him to the White House once again.
But no more.
The assumption that the aggressive trade posturing was merely a negotiation tactic, just a means to strongarm China and other trading partners into more favourable deals, no longer holds. The events of the last few weeks, last few days especially, have proved that it is a whole lot more than just posturing.
The White House’s decision to escalate tariffs, double down on protectionism, and effectively abandon the stock market as a barometer of success has forced investors to reassess everything they thought they knew about this administration’s economic strategy. The result? A sharp pivot away from risk and into the safety of defensive assets.
Trump’s first term was defined by a near-obsessive focus on the stock market. Every record high in the S&P 500 was heralded as proof of his economic prowess. Market selloffs were met with carefully timed reassurances, tweets aimed at propping up investor confidence, and even pressure on the Federal Reserve to ease monetary policy.
That era is over.
The current administration is no longer prioritising market stability. Instead, the White House seems willing to tolerate – if not outright invite – market chaos in pursuit of broader ideological goals. Tariffs are no longer a negotiating tool; they are an end in themselves. And for markets, that changes everything.
The most immediate consequence has been volatility. Every rally is sold into, every moment of optimism crushed by another escalation in the trade war. Investors are not just worried about tariffs; they are deeply unsettled by the shifting global economic order.
The idea of a “transition period” – that markets will simply need time to adjust before stabilising – offers little comfort when the transition itself is undefined and chaotic. Businesses are finding it impossible to plan ahead, capital expenditure is stalling, and global supply chains are being rewired in real time. The uncertainty alone is proving enough to shake investor confidence to its core.
The most telling indicator of market sentiment is not just the selloff in risk assets but the rush into safe havens. Gold, the ultimate hedge against financial and political instability, has surged. The Swiss franc, historically a refuge during times of economic distress, has strengthened.
Meanwhile, defensive stocks—sectors like healthcare and consumer staples—have outperformed as investors seek shelter from the storm. This is the market’s reflection of growing geopolitical concerns and the realisation that increasing tensions will take a while to resolve.
This shift is not temporary. The market rotation away from high-beta, growth-sensitive stocks like technology and consumer discretionary and into defensive positioning suggests that investors are preparing for prolonged uncertainty. This is not just about tariffs. It is about a broader recalibration of global economic relationships, one that is fundamentally altering investment strategies.
The traditional “Trump trade” of buying US equities on tax cuts, deregulation, and economic stimulus has been replaced by a more cautious approach, one that prioritises capital preservation over speculation.
Compounding the issue is the Federal Reserve’s increasingly difficult position. With inflation concerns rising due to higher import costs and supply chain disruptions, the Fed’s ability to cut rates aggressively to counteract market turmoil is constrained. This means that investors cannot count on monetary policy to provide the kind of cushion it did in previous downturns.
Instead, they are left navigating an environment where both fiscal and monetary policy are sources of uncertainty rather than stability.
The message from the market is clear: the old playbook does not apply, at last not for a while. Trump’s economic strategy has evolved from market-friendly to market-disruptive, and investors are adjusting accordingly. Those who once bet on Trump’s commitment to stock market performance are realising that his priorities have shifted. The trade war is not a sideshow; it is the main event.
And until the dust settles, risk assets will remain under pressure while safe havens continue to shine.
For investors, the lesson is simple—prepare for volatility, position defensively, and abandon any hope that this administration will step in to rescue the markets. The era of Trump using the stock market as a scorecard is over. What comes next is uncharted territory, and markets hate nothing more than the unknown.
Copyright Business Recorder, 2025
The writer can be reached at [email protected]
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