The Donald Trump administration and the Federal Reserve are signaling a lack of relief amid escalating trade tensions and policy uncertainty. Experts warn that this could further drive the markets lower.
What Happened: According to Craig Shapiro from 3-Circle Investments by The Bear Traps Report, the absence of this perceived “Trump put” or “Fed put” could trigger a swift and significant market downturn.
“The market has been searching for a Trump put or a Fed put and was informed this past week that both puts are struck lower,” Shapiro noted in his analysis. He believes the Fed will only intervene when financial stability is threatened, specifically if the U.S. Treasury market begins to dysfunction.
Speaking on Friday, Federal Reserve Chair Jerome Powell emphasized that the Fed’s priority remains achieving its dual mandate of maximum employment and stable prices.
While acknowledging that the economy is “still in a good place,” he stated that the Fed is closely monitoring the economic impact of new policies, particularly trade.
“It is too soon to say what will be the appropriate path for monetary policy,” Powell stated, highlighting the potential inflationary impact of tariffs, stating, “Looking ahead, higher tariffs will be working their way through our economy and are likely to raise inflation in coming quarters.”
“So that leaves the Trump put and him walking back from this trade agenda. So soon after he implemented in last week would seem incredibly weak for a man that rarely ever admits he was wrong,” adds Shapiro.
Why It Matters: Jon Keidan, Founder & Managing Partner of Torch Capital, echoed concerns about the long-term consequences of these tariffs.
He warned that the resulting volatility forces companies to “calculate worst-case scenarios,” impacting capital allocation, investment decisions, and overall business planning. This, Keidan argues, will lead to a “big corporate slowdown,” potentially causing demand-supply imbalances even if trade issues are resolved quickly.
Shapiro concluded his note with a stark warning: “All this being said, the lack of the ‘put’ for now means I think we are going to go significantly lower very quickly until UsT market dysfunction starts and the Fed says ‘no mas’ because this will eventually bleed into economic activity and exacerbate the slowdown.”
Price Action: By Friday’s close, the S&P 500 was on the brink of a bear market, having fallen 17.46% from its record peak of 6,147.43 points. The Dow Jones Industrial Average was also significantly down, shedding 14.99% from its 52-week high of 45,073.63 points. The Nasdaq 100, already in bear market territory, had declined by 21.71% from its high of 22,222.61 points.
The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, slumped on Monday. The SPY was down 5.85% to $505.28, while the QQQ declined 6.21% to $422.67, according to Benzinga Pro data.
As of Monday, the futures of Dow Jones were lower by 3.05%, whereas S&P 500 dropped 3.98% and the Nasdaq 100 declined by 5.00%.
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