The Markets Are Getting Used to Trump
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Trying to parse market reactions to world events can feel a bit like armchair psychology. Lately, investors seem to be holding something back—amid a barrage of potentially seismic decisions from the White House, markets have barely budged.
In moments of global instability, traders usually start selling. President Obama’s threats to Syria during his second term gave traders “jitters.” Trump’s escalating trade war with China during his first term deflated the stock market. And last spring, when Trump unveiled “Liberation Day”—a plan to impose punitive tariffs on dozens of foreign nations—the S&P 500 shed a record $5 trillion over two days. It remains the biggest market shock of the president’s second term so far.
But the reactions to three headlines from this past month tell a different story. When U.S. forces captured Venezuelan President Nicolás Maduro on January 3, reviving an old protocol for dominance in the Western Hemisphere, the markets held strong. When Federal Reserve Chair Jerome Powell revealed on January 11 that he was under criminal investigation by the Justice Department, and that the central bank’s independence was potentially under threat, markets responded with startling calm. And when Trump proposed a raft of European tariffs on January 17, as part of an effort to seize Greenland from our Danish allies, the market reaction, although noticeable, was far from catastrophic.
The fact that traders haven’t reacted so dramatically to volatility in 2026 is partly the product of better-than-expected economic growth in 2025. Although consumer prices remain high and job growth is slow, most experts will tell you that the American economy is in pretty good shape: The S&P 500 grew 16.39 percent last year; unemployment, although higher than when Trump took office, is still relatively low; and inflation isn’t expected to balloon over the coming year. (Prophecies of a recession turned out to have been wrong.)
Traders are weighing Trump’s actions against that rosy backdrop, and have lately been acclimating to the president’s caprice. The “TACO” theory (short for “Trump Always Chickens Out”) emerged as a way to describe his tendency to overpromise. But the markets’ resiliency over the past month indicates a more all-encompassing anhedonia.
Ahead of the mission to extract Maduro from Caracas, Trump suggested that U.S. intervention in Venezuela was intended to free up the country’s oil reserves, which are thought to be the largest in the world. It seemed possible that American companies would barrel up those trillions of gallons of oil, increasing global supply and lowering prices—a boon for purchasers and a potential problem for the energy companies already facing an oversupply problem. But because this all unfolded early on a Saturday morning, and oil-futures trading doesn’t open until Sunday evening, investors had a slight buffer.
Josh Lipsky, the chair of international economics at the Atlantic Council, told me that energy traders understood pretty quickly that there wouldn’t be “some influx of oil coming on.” American oil companies were reluctant to pour money into Venezuela given the country’s crumbling infrastructure, its history of political instability, and the cost of refining its low-quality reserves. A protracted battle over the country’s leadership also seemed unlikely, meaning that the effects of Maduro’s capture would largely be felt locally. After a moment of initial uncertainty, the markets quickly recovered—a muted reaction to what could have been a much larger, and much costlier, event.
The revelation that the Justice Department had subpoenaed the Federal Reserve chair posed an entirely different sort of risk. In a video message announcing the news, Powell accused Trump of persecuting him over his refusal to lower interest rates as quickly as the president would like. The Fed is famously independent from daily politics, which is part of its strength, and the dollar’s strength; Trump’s attempt to assert control over it could have severe economic consequences. There was a chance that, after Powell’s announcement, traders would start to price in that danger.
But as with the Maduro operation, this happened on a weekend, and markets had a buffer. That same night, Trump distanced himself from the DOJ’s investigation, and Senator Thom Tillis (a member of the Senate banking committee) came out strongly against it. Krishna Guha, the vice chair of the investment-research firm Evercore ISI, told me that had those developments not occurred, the market could have “responded very violently.” But by Monday afternoon, traders had barely reacted.
Something about Trump’s social-media proposal to put tariffs on European nations spooked markets more than the investigation of Powell or the capture of Maduro. Once again, the news arrived on a weekend. When trading resumed, stocks did noticeably decline, and the dollar weakened—but the 2.1 percent dip in the S&P 500 was nothing close to what happened after the “Liberation Day” announcement. When the president reneged on his Greenland-tariff plan last week, markets steadied.
“I think that we got a little taste of how bad things would have been if the administration had continued along the escalation path,” Guha said. According to John Canavan, the lead market analyst at Oxford Economics, that initial dip was likely compounded by a spike in Japanese-long-term-bond yields. Investors may have also learned their lesson from the slight pullback that followed last year’s “Liberation Day” panic; some of those proposed tariffs were eventually paused, reduced, or delayed. Although many of the big ones remained in place, it became clear that Trump was essentially using the threat of economic devastation as a negotiation tactic.
The economists I spoke with stressed that although these three cases are distinct, on the whole, markets have become more inured to the Trump administration’s actions. For now, the fate of Americans’ 401(k)s is not tied to the president’s Truth Social account. But that could always change; just this week, the president wrote that the United States has deployed a “massive armada” to the Middle East in an attempt to force Iran to end its nuclear weapons program. Financial markets are in the business of pricing threats—and Trump will surely keep them coming.
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Evening Read
The Film Students Who Can No Longer Sit Through Films
By Rose Horowitch
Everyone knows it’s hard to get college students to do the reading—remember books? But the attention-span crisis is not limited to the written word. Professors are now finding that they can’t even get film students—film students—to sit through movies. “I used to think, If homework is watching a movie, that is the best homework ever,” Craig Erpelding, a film professor at the University of Wisconsin at Madison, told me. “But students will not do it.”
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Rafaela Jinich contributed to this newsletter.
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