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The market no longer steps on the brakes and dances delicately with Trump's policies
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Hello everyone, today XM Forex will bring you "[XM official website]: The market will no longer step on the brakes, and will dance delicately with Trump's policies." Hope it will be helpful to you! The original content is as follows:
U.S. President Trump encountered almost no resistance in the process of tearing down global economic rules, whether it was from his Republican colleagues, political opponents or institutional constraints. The only exception is the "market". But now, even investors are consolidating their firepower, causing the financial system to accumulate more risks.
After Trump announced the "Liberation Day" tariffs on April 2, Wall Street responded very strongly. From April 3 to 4, US stocks fell 10%, and their market value evaporated by trillions of dollars. This forced Trump to make a rare concession, suspending the imposition of reciprocal tariffs on dozens of countries, and U.S. stocks bottomed out and rebounded. Since then, Wall Street has been rising all the way, with the S&P 500 rebounding by 35%, setting a record high.
This incident shows that the "market" is one of the few forces that can form a real check and balance against Trump's attempt to reshape the US and even the global economy.
The only problem is that the president has continued to implement unconventional policies in recent months, but investors have failed to step on the brakes in time.
Federal Selling Rights
The so-called "Trump Selling Rights" means that the president will not let the market fall too much - essentially a mirror version of the famous "Feder Selling Rights".
Trump seemed to do that in April, but that was to clean up the mess he created himself. It can be said that what really saves the economy is investors putting pressure on the president to reconsider policies that most economists consider unwise.
Now, Trump and the market are entering a wonderful dance together.
Investors seem to believe that the market can ultimately stop Trump from going too far in tariffs or other policies. But,Investors have not overreacted or even responded at all in controversial measures such as Trump fired the Director of Statistics Bureau, criticizing Federal Reserve Chairman Powell, pressured Intel's CEO to resign, and imposing high tariffs on Brazil and India. The market has hit a new high, giving Trump the confidence to further test the limits.
Risk Risk
The market has the ability to curb the president's excessive economic policies, but it has not exerted this ability. Why?
As the saying goes, the “rice bowl” of stock investors lies in maintaining optimism. As long as there is no obstacle to derailing the "market train" immediately, it is in their interests to keep the market moving forward at a high speed. Of course, the U.S. economy faces considerable levels such as high tariffs and budget deficits, but markets can choose to ignore them until these or other issues pose direct threats to the economy.
However, in the face of Trump's unconventional policies, insufficient market response may not only be delaying the day of "calculating accounts", but may also exacerbate the potential impact in the future.
Why? The economic and geopolitical paradigms are undergoing real shifts, and investors are not digesting the risks that xmspot.come with them. No one knows what impact these shifts will eventually have, but we know that the greater the uncertainty, the greater the downside risk.
The interest rate spread of US corporate bond yields is a "barometer" of corporate credit risks and market sentiment, and is worth paying close attention. Recently, the yield spread of US investment-grade corporate bonds (i.e. the difference between corporate bond yields and risk-free Treasury bond yields) has narrowed to 73-75 basis points (0.73%-0.75%), setting a lowest level since 199813. This means that the additional xmspot.compensation required by investors to assume the risk of default becomes very low.
Extremely low interest rate spreads have raised concerns about whether the market is overly optimistic and xmspot.complacent. Some analysts warn that current pricing may not adequately reflect potential risks, such as: economic slowdown or recession, inflation stickiness and geopolitical and policy uncertainty.
Afterwards, it is unlikely that the market will attack Trump until something really unexpected or extreme happens. During this period, investors can defend the status quo with the reasons such as steady corporate profit growth, high enthusiasm for artificial intelligence, still considerable economic growth, low unemployment rate, and consumers are still spending.
Wall Street's choice not to step on the brakes means that the train will still roll forward. As for whether there will be a collision, it is still unknown.
The above content is all about "[XM official website]: The market no longer steps on the brakes, dances delicately with Trump's policy". It was carefully xmspot.compiled and edited by the editor of XM Forex. I hope it will be helpful to your transactions! Thanks for the support!
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