'High uncertainty': How Trump’s 'intentional disruption' is creating chaos on Wall Street

31 March

In Silicon Valley, a popular slogan is "move fast, break things." But Wall Street and the New York Stock Exchange, in contrast, favor stability and predictability — and they have little appetite for chaos.

Chaos, however, has been a prominent ingredient of President Donald Trump's first two months back in the White House — from tariff proposals to mass layoffs of federal workers. And according to Julia Coronado, president and co-founder of MacroPolicy Perspectives (an economic consulting firm), the chaos of Trump's second term is making Wall Street very nervous.

In a Q&A interview with Politico's Sam Sutton published on March 31, a frustrated Coronado lamented, "We had a pretty great setup for Trump. Why would he mess with that?"

When Politico asked Coronado, a U.S. Federal Reserve economist, what she was "certain of," she replied, "I'm certain of absolutely nothing."

Coronado told Politico, "I'm not even certain which direction interest rates are going next. I have baseline scenarios, and ways to think about it, but we are seeing just a tremendous and intentional disruption to the status quo."

The Wall Street insider stressed that Wall Street doesn't like uncertainty.

"When there is low confidence in markets," Coronado told Politico, "you tend to see these ebbs and flows where you get some periods of volatile repricing. When the uncertainty is high, it's not like active investors are putting a lot of capital to work or making big bets. That means the market is more driven by trend followers — passive money. So you get repricing, and then a period of calm."

Coronado added, "That's what I think we're seeing right now. We have this volatile moment (where) investors are tuning into the fact that — at a minimum — Trump 2.0 is going to be quite a bit different from Trump 1.0. There are definite risks to growth and — maybe — he's not as sensitive to the stock market as we thought."

MacroPolicy Perspectives noted some of the ways in which Trump is promoting chaos during his second term — and how that can affect Wall Street.

"There are so many dimensions of risk right now," Coronado warned. "If you pull back your spending from a bunch of sectors and then they stop hiring and investing, does that cause a recession? Do tariffs lead to a burst of inflation that dampens consumer demand and crimps profit margins? These are the standard economic impacts of the policies that we can understand with the greatest clarity. But there are a couple of other elements."

Coronado continued, "One — let me categorize it this way — is the breakdown in the rule of law. This administration is aggressively taking actions that are being challenged in courts. They're ignoring court decisions. That can affect the economy. It can affect market functioning. It’s hard to say when and exactly how, but we always talk about one of the reasons (for) U.S. exceptionalism is stability, rule of law, clarity of contract law and a stable operating environment. We're really disrupting that right now."

Read Politico's full interview with Julia Coronado at this link.

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