Jamie Dimon, CEO of JPMorgan Chase, testified in the HART Building on December 6, 2023, before the Senate Bank, Housing and Urban Affairs Committee entitled Annual Surveillance of Wall Street Companies.
Tom Williams | CQ-Roll Call, Inc. |Getty Images
As days have passed since President Donald Trump announced the tariffs to be cleaned last week, a growing sense of uncertainty has begun to permeate Wall Street.
With stocks plunged and even the safe shelter of the US treasury sold, investors, executives and analysts began to worry that core assumptions from the first Trump presidency might no longer apply.
Among the market genocides, the world’s most powerful man has shown that he has greater tolerance towards inflicting pain on investors than anyone would have expected. Many times he and his agent denied that the administration would retreat from the best American tariff regime of the century, and sometimes speculate that Wall Street should suffer for Main Street to flourish.
“It was shocking that last week’s price action was shocking as the market began to completely rewrite what the second President Trump means for the economy,” said R. Scott Sheiffers, analyst at Piper Sandler earlier this week.
So, a few minutes on Wednesday after 1pm, Trump repeatedly relented on the highest tariffs in most countries except China, and was a great relief for investors when he caused the S&P 500’s biggest one-day stock rally since the depths of the 2008 financial crisis.
Despite Trump’s presidency, which tested the limitations of his administration, for example, bulldozing federal agencies and firing thousands of government officials, this episode shows that it can be explained by markets and Proxywall Street politicians like Jamie Dimon, CEO of JP Morgan Chase, but the administration’s guardrail.
Late Wednesday afternoon, Trump told reporters that he saw how the market was responding, and that he had acquired “Yippy” in his words and took his heart to heart in a morning television appearance that said the policy was pushing the US economy into a recession.
According to someone with knowledge of the JPMorgan CEO’s schedule, Dimon’s appearance in the Fox News interview was planned more than a month ago, and it was not a last-minute decision intended to shake up the president.
Bond vigilante
Of particular concern to Trump and his advisors, the New York Times, which cited people with knowledge of the president’s thinking, was fear that his tariff policies could trigger a global financial crisis after US government bond yields rose.
“The stock market, bond market and capital market are governors of actions taken to some extent,” said Wells Fargo Bank analyst Mike Mayo. “You were hearing about parts of the bond market that were under stress, about transactions that were exploding.
Investors usually turn to the Treasury in times of uncertainty, but sales indicate that institutional or sovereign players are dumping their holdings, leading to higher borrowing costs for governments, businesses and consumers. It could have been forcing the Federal Reserve to intervene, like in the previous crisis, by cutting interest rates or acting as a buyer of the government’s last resort bonds.
“The bond market was expecting a real crisis,” veteran market analyst Ed Yaldeni told CNBC’s Scott Wapner on Wednesday.
Yadeni said it was the “vigilantes of bonds” that caught Trump’s attention. The term refers to the idea that investors can act as a type of enforcer regarding government actions that are considered less likely to be repaid.
Amid the market termination, Wall Street executives reportedly were worried that they didn’t have the impact they had under the first Trump administration when former Goldman partners, including Stephen Munucin and Gary Kohn, could turn to them.
However, last week, in his mission to reshape the global order of the past century, Trump has shown investors he is pleased to turn his hostile approach to the edge of the knife, between his trading partners and the bigger economy.
“Chaos Discount”
Banks entered the year with great enthusiasm after Trump’s election, carefully looking at the central role they play in lending to businesses and consumers.
According to Mayo and other analysts, the setup has been promising for decades. While strengthening the economy will help increase the demand for loans, the return of trading activities, including interest rates, deregulation, mergers and IPO lists, will simply add fuel to the fire.
Instead, by last weekend, the bank’s stocks were on the Bear Market, giving up all profits since the election, fearing that Trump might be leading the economy into a recession. In the midst of the uprising, reports may show slower transactions as corporate leaders adopt a waiting attitude.
“Chaos discounts, we call it,” said Brian Foran, an analyst at Truist Bank.
Foran and other analysts said Trump’s factors made it difficult to predict whether the economy is heading for a recession.
Investors will then focus on JPMorgan, which will begin its first quarter revenue season on Friday. They will likely look to Dimon and other CEOs about economic health and how consumers and businesses operate during tariff negotiations.
The Wednesday grace period could prove short-lived. The day after Trump’s announcement and historic rally, the market continued to decline. Between the two biggest economies of the world, each with its own needs and vulnerabilities, there is an uncertain path to compromise. Universal 10% tariffs are still in effect.
“We’ve come close,” said Mohamed El Elian, chief economy advisor at Allianz, Munich-based assets manager, referring to the crisis the Fed needs to intervene.
“I don’t want to get there again,” he said. “The more you reach that point repeatedly, the higher the risk you are going to go beyond it.”
