"Been down so long it looks like up to me" -- a tale told mostly in tweets*

Market Psychology in 2025

"I'm going to lob a half dozen grenades into that building!"

Everyone runs out, screaming and trampling each other.

[Consults with advisors]

"Maybe I'll just lob three grenades into the building."

Everybody runs back in, singing and dancing.

 

We’ve talked about this before. Despite what you’ve heard, the current stock market loves uncertainty—probably because it contains at least the possibility of good news, and traders really want to hear some of that. As far as I can tell (keeping in mind that I am no expert on the financial system in general, and bonds in particular), bond traders remain more traditionally hard-headed in this respect.

Huge surges are sparked by vague, noncommittal statements from a secretary who is currently in a power struggle with Musk and Loomer and who may not outlast those unsustainable tariffs.

While on the subject of uncertainty, you have to wonder how the markets would react under some other administration if the Secretary of the Treasury—who was seen as one of the primary sources of stability in the economy—were to get into a shouting match in broad daylight at the White House with the second (second?) most powerful man in the country.

Putting aside the fact that these new “moderate” tariffs are still sky-high, there is no reason to believe that Trump won’t return to his more extreme position. For starters, Trump and many of his advisors deeply believe in the wisdom of tariffs, though their rationales may differ and even contradict each other.

Trump’s ego—and his favorite negotiating strategy—both depend on maintaining a perception of dominance. It is difficult to imagine the general reaction to this new position not getting under his skin.

It is worth mentioning that even if Powell’s job is secure through the end of his term—something I’m not sure we should necessarily assume—Trump is continuing to interfere with and attempt to intimidate the Fed on a level that, in normal times, would cause an outcry and a substantial reaction from the markets.

"May defend"

Even if we take the tariffs and the firing of Powell off the table, there’s still plenty of bad news to go around.

* Technically not "tweets" but you know what I mean.