Trump follows Jay Powell. It will probably just make it worse

Cnn
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It was a weekend when the financial markets should have been shaken: the President hit 30% tariffs to two of the largest trading partners in America and went on TV to drive over the head of the Federal Reserve.

In a simpler time, a few months ago, such threats and the sight of the President's team could have been a reason for investors for the potential head of the independent central bank to panic. (And it was indeed!)

But the Wall Street hardly shrugged on Monday and decided to switch off the Trump show and concentrate on the relatively happier programming on the horizon: a strong season of the company results that begins this week and describes that the economy is still in a decent form.

“The market has just thrown up its hands and said:” My goodness, we can't find out, “said Lawrence White, an economic professor on the Stern School of Business of the NYU, on Monday.” There will be something outrageous – and now means 'outrageous' Really Exemplary – that will move the market in one way or another. ”

But for the time being, said White, the markets are still in Taco mode, provided that “Trump always” chickens from its most extreme plans.

Of course, the Taco trade works – in which investors buy the DIP when Trump says that he will do something if he knows that he will withdraw – only until not. The non -reaction of Wall Street seems to increase Trump's belief in his own instincts in Fed and US trade policy – even if they were catastrophic for the economy.

Icymi: At the end of last week, Russell Vouht, Trump's director of the Office for Management and Household, accused Fed Fed Chairman Jerome Powell, had to violate the law by not corresponding to the regulations of the state supervision and was the congress on details about the “magnificent revision” of the central bank in DC.

(It is worth noting that Vougge's boss transformed the Oval Office into what was called “Gilded Rococo-Hellscape” for a time.)

Trump and his consultants know that they cannot simply split the door of the Fed without triggering alarms on Wall Street and beyond. However, you can test the limits of your executive power, floating statements in the media to see how and whether markets react, such as the Velociraptors, who test the fences for weakness in the Jurassic Park.

CNN officers announced last week that there were no active efforts to release Powell, and Trump repeated on Friday that he did not try to remove the Fed chair, although Trump believes that he does a “terrible job”.

The Fed is not pulled into the dirt. In response to VOUGHTS accusations, the central bank published a long FAQ about the renovation over the weekend. And on Monday, CNN reported that Powell asked the Fed General Inspector to officially check the renovation of 2.5 billion US dollars.

Powell is famous to wade in politics, and it seems that there is no amount of the president's playground names rattling him. In fact, it is also likely that the Fed's monetary political purists want to penetrate the screws on Powell that they cannot be severely impaired by politicians who are looking for a short -term economic foam.

It makes no sense for investors to become anxious – at least not yet.

There is a proverb in Wall Street that recommends “to sell and go” in May, as the shares between May and October were historically weaker. But since Powell's term of office runs in May 2026, the markets are now praising in “Jay until May and then walking away,” said Daniel Alpert, Managing Company of the Westwood Capital.

“Nobody believes he will step back and nobody believes that Trump's bullying will do anything but stiffening Powell's determination,” added Alpert.

The Taco trade was profitable, which in general all Wall Street really interests. However, some analysts say that the markets in the discomfort of Trumpian uncertainty have become a little too comfortable, especially in relation to tariffs.

Shares reached a record high last week, a fact that Trump was found on Thursday as proof that his “tariffs were very well received”. The appearance of the consent of the financial world is risky because he can encourage the president to double the ideas, and universal tariffs and executive control over interest etching, which would ultimately affect the economy.

“The market is too clear that President Trump will reverse the course before the tariffs of August 1,” said Mike O'Rourke, Chief Market Strategist at Jones Trading, in a message to customers on Sunday evening. “The new record heights for the S&P 500 have the trust of the administration that tariffs are the right political way.