U.S. stock traders, don't wait any longer! Recent decline fails to awaken "Trump put options"

According to Zhitong Finance APP, the information indicating that "Trump put options" are merely a wishful thinking of traders has been conveyed by President Trump himself. On Thursday, when asked about the recent significant sell-off in the U.S. stock market, Trump stated, "I haven't even been paying attention to the stock market."

Trump dismissed the notion that his recent indecision on tariffs against Mexico and Canada had anything to do with the unease permeating Wall Street. As is typical for Trump, he has long blamed others for the responsibility. He claimed that the "puppet masters" behind the recent decline in U.S. stocks are "globalists." He stated, "Those globalists foresee how wealthy our country will become, and they don't want to see that happen."

This week's decline in U.S. stocks is the most severe since Trump's election victory four months ago. Data shows that the S&P 500 index fell 3.1% this week, the Dow Jones Industrial Average dropped 2.4%, and the Nasdaq Composite plunged 3.5%, entering a technical correction zone—down more than 10% from recent highs. This reflects extreme volatility in market sentiment, particularly influenced by the uncertainty surrounding Trump's administration's trade policies.

The poor performance of U.S. stocks has sparked two competing but related concerns on Wall Street. On one hand, Trump—who became known for using the stock market as a barometer of success during his first term—may indeed be willing to sacrifice the U.S. stock market bull run and the economy he inherited (at least for now) to realize his vision of a new era of American exceptionalism. On the other hand, even if Trump quickly pauses tariffs to curb economic decline, his tough rhetoric on trade and market issues may only serve to prevent economic downturns, but the ongoing "will he or won't he" makes Trump so unreliable that investors have no choice but to prepare for the worst.

Michael Shaoul, CEO and founding partner of Ion Macro Management, stated, "The general interpretation of Trump's second term in terms of policy and its impact on the stock market is incorrect." He added that regarding Trump's policy reversals, "the times you can feel at ease are limited."

Previously, investors often discussed "Fed put options," meaning that the Federal Reserve would intervene before situations began to deteriorate, thereby eliminating volatility that could undermine stock market stability. This is akin to the Fed selling a put option, where the seller of the put option is obligated to buy stocks when prices fall below a certain level (the strike price). Investors have created the term "Trump put options" based on this concept.

However, the current developments are contrary to initial expectations that Trump would spare no effort to support the stock market. After Trump's election victory on November 5 last year, investors rushed to buy stocks of tech giants and other companies, as they optimistically believed that Trump's pro-growth policies would boost the economy This viewpoint is no longer tenable. The intermittent trade war initiated by Trump and the cost-cutting policies promoted by Musk intertwine with concerns about the sudden weakening of the U.S. economy and persistently high inflation, affecting investor sentiment. Since peaking on February 19, the seemingly unstoppable U.S. stock market has fallen over 6%, experiencing fluctuations and sharp declines along the way—investors have endured at least a 1% fluctuation in the S&P 500 index during trading sessions for seven consecutive days.

Notably, technology stocks like Nvidia and Tesla, which led the U.S. stock market in the past three months, have been severely impacted. The index tracking the so-called "seven giants" of U.S. stocks, as reported by Bloomberg, has dropped 16% from its historical high in December last year.

Beyond Trump, U.S. Treasury Secretary Janet Yellen has also signaled potential disappointment for investors. Yellen stated that Trump's "America First" policy is a necessary antidote to correct the Biden administration's excessive spending. She emphasized that this administration is very willing to tolerate any short-term pain in the stock market to achieve structural changes in global trade and international relations. In an interview on Friday, she bluntly said, "There are no (Trump) put options." This suggests that if investors hope Trump will use policy to prevent a stock market decline, they may be disappointed.

Keith Lerner, Co-Chief Investment Officer and Chief Market Strategist at Truist Financial, does not entirely believe that there are no "Trump put options," especially if the U.S. stock market continues to decline, such as by 10% or 15%, or even more. However, even he admits that Trump's priorities and ambitions have become indifferent to market fluctuations. He stated, "There may be 'Trump put options,' but they might be lower than people expect."

Michael Purves, CEO of Tallbacken Capital Advisors, stated that even if Trump is willing to step in to prevent a stock market decline, the effectiveness is uncertain, as Trump has become unpredictable. He remarked, "Assuming Trump put options would actually work after being exercised, there is a key risk—it's hard to believe Trump would suddenly become a trade dove or quickly concede to foreign countries to reach a final agreement."

Regardless, it is clear that the back-and-forth on tariff issues has left investors feeling fatigued. Just a few months ago, few anticipated this