Macroscope | Normalisation of Trump’s chaos can only go so far
Markets assuming Trump will chicken out and downplaying risks contribute to the normalisation of the US president’s chaotic behaviour
It is one of the oldest sayings on Wall Street, yet the adage “markets hate uncertainty” has never stood up to scrutiny. Like most maxims, it has a ring of truth but is a gross oversimplification.
What is indisputable, however, is that for several decades investors took major economic, financial and political trends for granted. For a long period beginning in the 1980s, the world was relatively predictable. Many economists dubbed this era “the great moderation”. Others pointed to the impact of globalisation and the peace dividend following the end of the Cold War.
Yet a year after US President Donald Trump began his second term, this world no longer exists. Although political and economic risks increased significantly in the aftermath of the 2008 global financial crisis, Trump has ripped up the geopolitical, economic and financial rule books.
Yet not only have fears of a “hard landing” for the global economy – which were rife when Trump launched his tariff blitz – tapered off, the percentage of respondents anticipating a “soft landing” has fallen sharply. Strikingly, 52 per cent of those polled expected “no landing” in the next 12 months.