Abandon Wall Street? Can Trump really do it?

The US stock market is experiencing a "free fall," sounding the alarm for recession. Will Trump back down first?

Since last Thursday, the US stock market has undergone a thrilling three-day plunge. Last Thursday and Friday, the S&P 500 index recorded its largest two-day drop since March 2020, with over $5 trillion in market value evaporating in just two days. The tech-heavy Nasdaq Composite Index has fallen into bear market territory, and the Dow Jones has also entered a correction zone.

On Monday morning, US stock futures continued the downward trend, with the fear index futures soaring, gold continuing to pull back, copper and oil plummeting, and safe-haven sentiment driving the yen higher.

The sell-off triggered by the aggressive tariff policies of the Trump administration has been so intense that some market veterans have likened it to the shadow of the "Black Monday" crash of 1987.

At that time, the market fell for three consecutive days, dropping 3.81% on October 14 (Wednesday), 2.39% on October 15 (Thursday), and 4.6% on October 16 (Friday), before experiencing a single-day crash of 22% on what became known as "Black Monday," marking the worst single-day percentage drop in history.

Wall Street in Fear vs Trump's Team's "Calm" Response

In the face of this market turmoil, which some traders have dubbed a "massacre," Wall Street is generally feeling shocked, angry, and fearful.

On Friday, the US stock market's fear index VIX soared to its highest closing price since the COVID-19 pandemic, and billions of dollars in IPO transactions were halted. Media opinions indicate that from hedge fund moguls managing vast wealth to ordinary wealth advisors, the American investor class is struggling to adapt to the new reality under Trump's trade offensive—they seem to have become "collateral damage."

Jay Hatfield, CEO of Infrastructure Capital Advisors, referred to the tariff plan diagram presented by Trump as a "death chart," angrily denouncing the policy as "utterly foolish." Hatfield stated that upon seeing the chart, he immediately began to reduce risk assets, cutting about 40% of the risk exposure in the managed mutual funds by the close of Friday.

Richard Steinberg, a senior wealth advisor at Focus Partners Wealth in Boca Raton, also told the media that he was inundated with anxious calls from clients and felt "very frustrated" with Trump's approach, believing it "lacked complexity."

Analyst Peter Tchir lamented his previous bullish stance on energy stocks, as the plummeting oil prices led to significant declines in related stocks, leaving him "stuck."

In stark contrast to the widespread panic on Wall Street, the Trump administration's attitude appears unusually "calm."

According to media reports, Trump himself seems unfazed by the market's plunge, even heading to the golf course on Friday morning after the stock market fell for the second consecutive day. He has expressed his determination to stick to the current course both publicly and privately, believing that the short-term market pain is a necessary cost for achieving long-term prosperity in the US and revitalizing manufacturingThere are opinions that, regardless of new tariff policies, the stock market is due for a reckoning. This is because, in recent years, the S&P 500 index's stock prices are higher than at any time since the internet bubble.

Priya Misra, a portfolio manager at JP Morgan Asset Management, stated:

“The significant rise in the stock market over the past few years and the loose financial environment have provided a buffer for Trump. Despite last month's poor performance, we have merely returned to the levels of May 2024.”

U.S. Treasury Secretary Becerra was even more blunt. He pointed out that even with last week's plunge, stock market returns still look strong—with annual returns over the past decade remaining around 10% or higher.

In an interview, Becerra downplayed the impact of the stock market decline, stating that “on long-term charts, you wouldn’t even notice” the recent market drop, attributing it to “more of a Mag7 issue rather than a MAGA issue.”

On Sunday, Becerra also emphasized the issue of wealth disparity in the U.S. during a media program, stating that “88% of the stock market is owned by 10% of the people, and the bottom 50% of Americans have almost no equity and are burdened with various debts.”

The current market sell-off may be a comfort for Becerra, as it “punishes the rich and benefits the average person.” Durham Abric, head of U.S. inflation at Citadel Securities, pointed out:

“Almost half of Americans have no exposure to the stock market, and they may actually be pleased to see interest rates decline.”

What are the upcoming risks?

What Wall Street is now generally worried about is that a decline in interest rates could be a precursor to a U.S. economic recession, and “long-term returns may never materialize.”

Peter Cardillo, chief market economist at Spartan Capital Securities, believes that the performance of the stock and bond markets indicates that unless Trump or other world leaders ease their stance on tariffs, the U.S. economy “appears to be heading towards recession.”

This concern is not unfounded. As previously mentioned by Wall Street Insights, JP Morgan analysts have raised their forecast for the probability of a global recession from 40% to 60%; other Wall Street investment banks have also begun to lower their year-end target for the S&P 500 index.

There is also a pervasive sense of unease in the business community. Kevin Gordon, senior investment strategist at Charles Schwab, pointed out that the biggest pain point is the uncertainty surrounding the final tariff rates, which makes it difficult for businesses to plan and invest effectively.

Drew Matus, chief market strategist at MetLife Investment Management, believes the current situation is like “driving on a dark road without headlights.”

“I don’t know what kind of guidance can be provided. There is uncertainty surrounding tariffs, global supply chains, corporate spending plans, and all of these impacts on the labor market.” Peter Cardillo commented:

“Trump says he doesn't pay attention to the market. But you know what? Everyone is watching the market. What does all this mean? Someone has to admit defeat first.”

Risk warning and disclaimer

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk