There’s a term Wall Street traders use when things get really bad: the “Trump put.” It’s the belief that the President will swoop in and save the market during downturns. For years, this safety net worked. Investors felt comfortable taking risks because they figured there was always a backstop. Someone would step in before things got truly ugly.
That theory just died.
Friday’s sell-off sent stocks to their lowest levels since last August. The Dow and Nasdaq both tumbled into correction territory, down more than 10% from recent peaks. The S&P 500 barely avoided joining them after five straight weeks of losses. And you know what everyone was saying? It’s the White House’s fault.
When Reassurance Stops Working
Researchers at Barclays put it bluntly: “Flip-flopping and headline fatigue is starting to seriously undermine the efficacy of the ‘Trump put.’” That’s analyst speak for “nobody believes anything the administration says anymore.”
The problem isn’t the Iran tensions themselves, though those are real enough. It’s that every time someone from the White House tries to calm things down, it just makes markets more nervous. Secretary of State Marco Rubio went on record saying the war would take “weeks, not months” to wrap up. The market yawned. Larry Weiss, head of trading at Instinet, summed it up perfectly: “No one knows the next steps, and there’s an inherent distrust regarding the statements made by both the administration and the Iranians.”
When reassurance stops moving markets, you’ve got a credibility problem.
The Oil Price Reckoning
Here’s where it gets scary. A barrel of Brent crude was hovering around $112 on Friday. Mark Zandi from Moody’s Analytics ran the numbers and found that oil only needs to hit $125 per barrel in the second quarter for the US economy to hit a real tipping point. With tensions still elevated, that’s not exactly a long shot.
Peter Tuchman, the trader known as the “Einstein of Wall Street,” was sounding alarms about inflationary consequences. “There is no end in sight with this war,” he said. “Oil is going up, up, up. When you’ve got oil at the levels where it’s at for a sustained period of time, the inflationary impact is huge.”
And here’s the kicker: JPMorgan analysts are projecting that even if tensions ease later this year and oil prices fall back to $80 a barrel, global growth will still drop by 0.6% and inflation will rise by 1 percentage point. If the Strait of Hormuz stays closed for another month? Crude could hit $150.
Even Bonds Can’t Save You
One of the strangest signals this week came from something called the 60/40 portfolio. That’s Wall Street speak for a classic diversified approach: 60% stocks, 40% bonds. Normally bonds are your safety blanket when stocks tank. They’re supposed to cushion the blow.
Not this time. Mohamed El-Erian, the former PIMCO CEO, wrote that the 60/40 portfolio just suffered its steepest monthly loss since 2022. Both stocks and bonds were falling together. For the average investor, that means there was literally nowhere to hide this week.
The Contrarian Case
Not everyone thinks the sky is falling. Torsten Sløk from Apollo Economics argued that markets are overreacting to what will likely be just 4 to 6 weeks of volatility. He reckoned the Gulf region will ultimately become more stable and better integrated with the global economy.
Peter Mallouk, CEO of Creative Planning, took a similar long-term view. “What matters in the short run: wars, oil prices, tariffs, interest rates, sentiment, a million other things,” he wrote. “What matters in the long run: Earnings.”
There’s wisdom in that, sure. But it’s also easy to talk about the long game when your portfolio is getting pummeled in the short term. Marko Kolanovic, JPMorgan’s former chief market strategist, was blunt about the administration’s handling of it all: “All the verbal gymnastic from the administration to keep oil prices low was in the end counterproductive. Masking the magnitude of the problem and delaying actions to reopen Hormuz.”
You can check out more perspectives on ongoing business developments to get a fuller picture of market sentiment.
Where Does This End?
The real question nobody can answer is what happens next. Investors are caught between believing that either things will blow over quickly or that the conflict spirals into something far worse. The market’s reaction suggests most people aren’t betting on the optimistic scenario.
What’s clear is that the “Trump put” doesn’t work the same way anymore. Whether that’s because of credibility issues, because the stakes are genuinely higher, or because traders have just become smarter about not relying on political reassurance remains an open question. But one thing is certain: when the ultimate safety net disappears, the only thing left to do is catch yourself.
