Trump undermines the economic consensus

There is a strange mix of confidence and fear on the stock exchanges. Contradicting price signals confuse investors, analysts and stability guards in the central banks.

Daniel Zuglauf / CH Media

On Monday, the international financial and capital markets strangely reluctantly responded to Donald Trump’s recent announcement to increase tariffs to EU imports to 30 percent. After all, the new US customs letters seem to mean a no less big threat to the global economy than the first US customs shock of April 2.

At that time, the markets showed an immediate reaction, the sharpness of which seemed logical and easy to understand according to the common economic explanatory patterns. The courses of stocks and other risk papers collapse because high tariffs and the view of counter -tariffs make the prices of goods more expensive, dampen the demand and thus slow down the economic growth or even run into the contrary.

Investors hope that Trump only bluffs

Now the market participants seem to assume that Trump is bluffing to get a good deal for his country. Everything just half as bad? Maybe, maybe not. Only this is certain: the price signals that the markets send out are becoming increasingly cryptic and speculative, and they can hardly be explained with economic logic, let alone with rational experience from earlier times.

Is Trump bluffing with his announcement to increase tariffs to EU imports to 30 percent? The investors assume.Bild: keystone

After the first customs shock of April 2, only the immediately negative reaction of the stock markets corresponded to the well -known economic pattern. Otherwise, things were very unusual: In those days, a veritable burglary of the demand for American treasure bonds occurred, which led to the loss of value of these papers and thus automatically to increase their returns. In the United States, the returns of government bonds from other countries also increased vigorously.

Typically, however, investors in stress times react exactly the other way round: they buy US treasure bonds because they are considered to be relatively safe investment in phases. Their returns are falling. Experience has shown that the dollar also evaluates itself at such moments. Instead, the devaluation of the dollar to other currencies after the “Liberation Day” has greatly accelerated.

An “almost ghostly situation”

The Bank of England speaks in its current report on the financial stability of “shifts of historical correlations”. It means the previously described resolution of mutual relationships between the prices of stock market -traded assets that continued to follow a pattern for many years. The episode after the customs shock of April 2, a lightly throw on the global networking of the financial markets, where stressful situations could quickly transfer themselves from one place to other places, writes the Bank of England.

In the meantime, the stock markets have returned to the levels in front of the first customs hammer. And there they remained to the EU even after the recent threatening US customs letter. After the shock, the bond markets have also settled at somewhat deeper yield levels. Donald Trump causes a “chaos” and this leads to a “strange, almost ghostly situation in which everything remains in balance,” Jeffrey Sherman, an experienced American portfolio manager and specialist for bond markets, stated in an interview with the NZZ online publication “The Market” in the interview with the NZZ online publication.

He knows how long this balance will last as everyone else. The Bank of England writes that the markets for stocks and other risk activists are “still susceptible to a sharp correction”. Such can also be transferred to the credit financing of companies and households unfavorably.

Brian Mandt, chief economist of the Lucerne Kantonalbank, sees the main risk of the economy and the financial markets, but less with tariffs than in debt. Since Donald Trump’s return to the White House, the problem has also been taken seriously at the markets. The contrast to the summer of 2024 is great.

Debt becomes the main risk

At that time, hardly anyone heard when ECB boss Christine Lagarde at a central banking meeting in Portugal warned the right-wing populists in France and elsewhere, to respect the EU fiscal rules and to lead the households so that the debt remains under control. US Federal Research chief Jerome Powell said at the same event about his own country: «The current level of debt is not intolerable, but the way we are on is. That is absolutely undisputed. “

Brian Mandt is the chief economist of the Lucerne Kantonalbank.Image: ZVG

«The train goes forward. The markets are currently focusing on this alone, »Brian Mandt summarized the mood in conversation with Ch Media at the time. But now it is becoming clearer: the train does not roll as it should. The danger is virulent that economic growth in the United States will slow down much more than most economists already expect. There is also a risk of negative surprises in Europe – at a low level, notabases.

High and increasing debts with less or no growth and too high inflation is a toxic combination. It could be the trigger of the sharp correction that the Bank of England warns. Has the toxic cocktail already been touched?

Brian Mandt and his colleagues pok in dense fog. The data on economic growth in the first months of the year are unreliable. They are distorted by extraordinary trading movements in connection with Trump’s customs announcements.

“Much does not fit together”

“A lot does not fit together, and we economists can hardly explain it,” says Mandt. “The susceptibility to forecasts is particularly high.” Actually, uncertainty would have to move investors to restraint. But the Sentiment indicator of CNN, who measures whether investors can be guided more of fear or greed, clearly shows greed (see graphic).

Image: CNN

Investors expect the reporting season starting in the USA these days. Obviously, many rely on the fact that the companies surprise with good winning in the half -year despite all the calls. But what happens if it turns out differently?

Every time a moment of terror makes the markets held briefly, the debt clock is noticeable. The looks are on Donald Trump in the quiet hope that he can once again tone their threatening ticks with a loud announcement.

Trump is creative on finding such opportunities. An important occasion could be the successor of central bank chief Jerome Powell, who must have regulated Trump by May 2026. Brian Mandt senses a risk: “If the president set an Adlatus and Jasager in Powell’s position, there could be a rebellion of the markets,” he fears. Because there is a conflict between Trump’s interests and the interests of the capital market investors.

High debts and high interest rates, of course, do not correspond to the taste of the government in Washington. But neither does investors like the combination of deep interest and high inflation. The final power struggle between politics and markets seems to be inevitable. From an investor perspective, it is difficult to decide which side you want to win. In any case, such a struggle for investors will be ugly. (aargauerzeitung.ch)