Well, that was quick. There’s an old market adage that stocks take the stairs up and the lift down but the reverse has been the case lately, notes Bespoke Investment, with the S&P 500’s measured drift lower followed by a V-shaped recovery.
Just 10 trading days after the Iran war low, it hauled itself back to record territory, surging 11 per cent with a speed that feels almost dismissive.
Despite the dire headlines and Donald Trump’s civilisation-ending threats, the correction ended up being a pretty mild affair.
During April 2025’s tariff scare, notes Morgan Stanley’s Lisa Shalett, stocks fell 20 per cent, roughly twice as much as the recent drawdown.
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“Part of that reflects the reality that markets have learned to anticipate reversals after aggressive policy threats,” she says, implicitly referring to the Taco (Trump always chickens out) trade.
“That is not complacency so much as adaptation.”
Indeed.
Wary of being wrong-footed, traders are less willing to sell into bad news, and more inclined to buy at the first hint of a climbdown. Greed – what if I miss the inevitable rebound? – trumps fear (pardon the pun).
This same equanimity could be seen in the reaction to renewed Trump threats against outgoing Federal Reserve chief Jerome Powell, with investors shrugging off even former Fed chair Janet Yellen’s warning that she had “never seen a threat of this level to the Fed before” and that it risked making the US look like a “banana republic”.
Essentially, investors are pricing Trump less as a structural disrupter than as a volatile showman who, for all his high-volume rhetoric, is ultimately constrained by markets and his own tendency to step back from the brink.
Ultimately, it is still a bull market. Investors are betting Trump can jolt it but not change it.
