Battle-hardened Wall Street bulls are proving very hard to scare - The Economic Times
Published 17 hours ago• 6 minute read
Battle-hardened Wall Street bulls are proving very hard to scare
Bloomberg
Wall Street shows resilience despite inflation, tariffs, and geopolitical tensions. Investors brush aside trade war fears, favoring bullish bets. Bitcoin surges, bonds stabilize, and stocks remain near records. Experts debate whether this is resilience or complacency. Some see opportunities, betting on the administration backing down from tariffs. Others warn of stretched valuations and unresolved trade issues.
’s tolerance for shock is becoming heroic.First came the inflation angst, then the tariff crash, then the war in the Middle East. At this point, it’s hard to imagine what could still rattle the investor class.
Speculative spirits were on display again this week, even as President Donald Trump escalated threats against major trading partners, including a 35% tariff on Canadian goods and a 50% levy on copper. Bitcoin surged past $118,000, bond volatility fizzled, stocks held near records and retail traders unleashed risky wagers anew.
It’s a form of investor resilience, built by facing down threats and emerging stronger — where even the prospect of a renewed US-led trade conflict gets brushed aside, in favor of bullish bets across the board.
JPMorgan Chase & Co. CEO Jamie Dimon has a different word for it: complacency. But for traders sitting on fattening profits in crypto, tech, leveraged ETFs, commodities and beyond, it’s feeling like vindication.
“We absolutely believe the recent bullish price action in risk assets makes sense,” said Max Kettner, chief multi-asset strategist at HSBC. “Bear in mind this is no longer just equities but spreading across virtually all risk assets. So if anything, we’d argue investors are once again under-exposed and continue to fight the rally.”Traders are getting harder to frighten even as measures that presaged past market stress climb. A global trade policy uncertainty index tracked by Bloomberg is rising, just as it did in the months before April’s global market meltdown.
Bloomberg
The S&P 500 closed Friday marginally below its record. Risk premiums tracking US corporate bonds hovered around their lowest level of the year. Bitcoin exchange-traded funds continued to see inflows. Volatility receded, with a gauge of US Treasury swings hitting its lowest level in nearly 3 1/2 years as measures of stocks. Oil and gold turbulence remained subdued.
And yet, Trump warned this week that new and higher rates will kick in Aug. 1, unless countries negotiate better terms. The announcement of a 35% tariff on some Canadian goods came the same day the S&P 500 hit its all-time high.
“The market has consistently shrugged off any issues, including tariffs, and even the brief conflict between Israel and Iran,” said Josh Kutin, head of multi-asset solutions, North America at Columbia Threadneedle Investments. “If the market is not overall responding negatively to any of those issues, I have a hard time seeing how that happens in the near-term.”
Kutin says the administration’s habit of backing off when markets react badly to trade policies keeps him calm — and on the lookout for tactical opportunities to add equity exposure. Indicators across several portfolios continue to flash bullish signals, he says, driven by strong momentum and relatively low volatility. And while acknowledging the current state can feel “toppy,” he believes the rally has room to run.
The view reflects an increasingly common bet across Wall Street, known as the “TACO” trade, for Trump Always Chickens Out. The wager is that either the administration will walk back its tariff threats, or the upshot of the offensive simply won’t be enough to derail the expanding US economy. Whatever the reasoning, bullishness is prevailing.
Trump took to social media this week to celebrate record highs in tech and industrial stocks, as well as an unstoppable crypto runup that sent Bitcoin soaring to $118,000. That market confidence — forged in an environment that has repeatedly punished skeptics — has made some investment pros queasy.
“People are getting a little bit too comfortable with this idea that Trump’s always going to back down,” said David Lebovitz, the global strategist of multi-asset solutions at JPMorgan Asset Management. “We’ve gone from a world where nobody knew anything to everybody knows something. It’s almost like the market’s going to go through this stress test where they see how far they can push it until they begin to see those cracks.”
Bloomberg
Complacency was also invoked by his boss, JPMorgan’s Dimon, as stocks hit record highs amid the deluge of tariff news this week. He said a trade framework with Europe still “needs to get done,” and that the Federal Reserve is far more likely to raise interest rates than is generally believed in markets.
“The rally has gone way too far,” said Kristina Hooper, chief market strategist at Man Group. “The tariff situation is far from resolved. It’s absolutely difficult for investors to model this out, so it’s easier to ignore it than think about the consequences.”
Hooper advises reallocating to equity markets that offer better diversification and more attractive valuations — including Europe, the UK and even China.
“I’m a sober realist,” Hooper said. “We have valuations that are at historically high levels. And so when stocks are priced at a near perfection, it’s a lot easier for disappointment to occur.”
Despite concerns over potentially stretched valuations and mixed economic signals, bulls say it’s a mistake to get in the way of markets rolling with this much momentum.
Kettner, for his part, believes the US exceptionalism will continue as he ratchets up HSBC’s overweight, particularly to US equities. This week’s erratic tariff announcements may end up being a bullish catalyst if walked back, he says. With a weaker dollar and lowered earnings expectations, the upcoming reporting season could provide further support for equities.
“We also strongly disagree with the idea of complacency,” he said. “Equities and risk assets are well positioned to climb the wall of worries further in the coming weeks.”
