Markets rebounded midweek after President Trump said he had “no intention” of firing Federal Reserve Chairman Jerome Powell, easing investor concerns about the Fed’s independence. Powell had previously threatened to remove him over the Fed’s interest rate policy. Trump also softened his tone on tariffs, suggesting that high tariffs on Chinese imports could eventually be reduced.
“We’ve seen that every time there’s good news on trade, the market reacts positively because they know it’s something that needs to be addressed,” Michael Green, chief strategist and portfolio manager at Simplify Asset Management, told Yahoo Finance on Thursday.
In contrast to the role Trump played when markets plunged on tariff news earlier this month, Wall Street experts say Trump has become a recognized market stabilizer – a sign that the White House may be keeping a close eye on recent volatility, especially in bond and currency markets.
On Monday, investors sold off U.S. stocks and traditional safe-haven assets, with the 10-year Treasury yield surging above 4.4% and the dollar (DX-Y.NYB) falling to its lowest level since 2022.
The unusual move, a move away from risk assets and volatility hedges, was seen as a rare market dislocation, with strategists dubbing it the infamous “sell America” trade. However, those trends began to change on Wednesday as comments from the administration on Powell and tariffs helped restore investor confidence.
The numbers speak for themselves: On Friday, the 10-year Treasury yield had fallen below 4.3% and the dollar was near the key psychological level of 100.
“The boost to confidence this week has been huge,” Mark Newton, head of technical strategy at Fundstrat, told Yahoo Finance. He acknowledged that while the market is likely to remain volatile and could retest year-to-date lows, the strong rebound is significant given the lack of a formal trade deal.
“Just knowing that there’s been a pivot and that the administration is willing to pull back is a good thing in itself,” he said.
Keith Lerner, co-chief investment officer and chief market strategist at Truist, added that Trump’s shift showed the administration “had some attention” for the market, but he also warned that the stock market’s future path could deteriorate if incoming economic data starts to crumble.
In response, Michael Kantrowitz, chief investment strategist and head of portfolio strategy at Piper Sandler, said in a client update on Wednesday that while “there is still a lot of uncertainty… the market has priced in a gradual change in the outlook, and I think this is another positive change that the market can find relief from.”
Kantrowitz added that macro forces, especially Trump’s policy rhetoric, remain the main driver of market sentiment, causing the market to swing sharply “like a pendulum.”
“Interestingly,” he added, “the top of the pendulum is called a ‘pivot’… Isn’t that ironic, don’t you think?”
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