Author: Ye Zhen, Wall Street Insights
U.S. President Trump once again triggered a massive shake-up in global markets with a social media post. Although his comments about a ceasefire in the Middle East were quickly denied by the involved parties, Wall Street still chose to “buy in.”
This indicates that in the market’s view, the president’s fear of a sharp decline is more important than the truth of his statements, and “capriciousness” itself has become a powerful tool to deter bears.
According to CCTV News, on Monday, Trump posted on social media that he was delaying the final deadline to bomb Iran’s energy facilities by five days, stating that both sides are engaged in “very good, productive dialogue” toward a “comprehensive and thorough resolution” of the conflict. This statement instantly reversed the market’s pessimism, leading to the most volatile trading day since the U.S.-Iran conflict erupted.
After the market opened, the S&P 500 surged as much as 2.2%, marking its largest daily gain since May, and the Dow Jones Industrial Average temporarily soared over 1,000 points. Meanwhile, oil prices plummeted more than 13%, with Brent crude falling below $100 per barrel, and the yield on the two-year U.S. Treasury briefly dropped sharply from its high to 3.79%.
(Brent crude falls below $100)
However, less than an hour after the tweet, Iran’s official sources denied that negotiations were underway. This scene was identical to two weeks ago—when Trump claimed “the war is completely over,” which also caused a brief stock market rally and a dip in oil prices.
This replay forces Wall Street to confront a deeper question: what exactly are markets trading?
The answer is not peace, but Trump’s market bottom line. Investors interpret this statement as a signal: the president’s extreme aversion to market declines will ultimately prevent him from executing the most extreme threats. Moreover, Trump’s capriciousness has become a market stabilizer: it discourages bulls from fully chasing gains and prevents bears from fully shorting.
TACO Trading Reappears in the Market
At 7:05 a.m. Eastern Time on Monday, Trump posted on social media that he was delaying the 48-hour deadline to strike Iran’s power facilities by five days, citing “very productive” talks that could lead to a “comprehensive and thorough resolution.”
Once the news broke, the market immediately reversed. Brent crude fell below $100 per barrel, dropping over 13%; U.S. stock futures surged; the two-year U.S. Treasury yield sharply declined by 0.22 percentage points to 3.79%; European stocks and bonds also rebounded rapidly from earlier declines.
After the U.S. stock market opened, the S&P 500 rose as much as 2.2%, its biggest single-day increase since May; the Dow surged over 1,000 points intraday. However, as Iran explicitly denied ongoing negotiations, the gains began to fade. By the close, the S&P 500’s gains narrowed to about 1.2%, the Dow finished up approximately 630 points (1.4%), and the rally in the bond market also subsided.
(Performance of major U.S. stock indices that day)
This scene is familiar to Wall Street. Two weeks ago, when Trump told the media “the war is completely over,” stocks surged almost identically, and oil prices similarly retreated. The rally at that time was also short-lived.
Media analysis suggests that Trump’s recent statements are partly aimed at calming investors shaken by the war, to avoid a painful sell-off at the start of a new week. Last Friday, the S&P 500 recorded its longest weekly losing streak in a year.
Knowing the statements are questionable, why does Wall Street still rally?
For Wall Street, whether Trump’s statements are true may not matter. The market’s sharp rebound isn’t because investors blindly believe the president’s “ceasefire” words, but because they see this as a guarantee: Trump’s extreme dislike of poor market data will ultimately prevent him from taking more drastic military actions.
Since the conflict erupted over three weeks ago, it has put global economies under pressure. The blockade of the Strait of Hormuz cut off critical energy supplies, driving energy prices higher and fueling inflation. The global bond market has lost over $2.5 trillion, experiencing its largest monthly decline in over three years. Meanwhile, the yield on the two-year U.S. Treasury has risen by more than half a percentage point since the outbreak, further constraining the Federal Reserve’s room to cut interest rates.
Tom Garretson of RBC Wealth Management said, “Trump has been trying to suppress oil prices, but perhaps once again, the bond market forced him to change course.”
Marko Papic, chief strategist at BCA Research, stated: “If this isn’t resolved within the next 7 to 10 days, we could face a global economic standstill. Today’s statement shows Trump realizes the real economy might be on the brink of a cliff.”
Some analysts also suggest that current trading logic resembles a Keynesian “beauty contest.”
Daniel Alpert, managing partner at Westwood Capital, pointed out that markets are not based on facts but on expectations of others. Even if investors suspect it’s a lie, as long as they believe others will see it as good news and buy, they will follow suit.
Moreover, FOMO (Fear of Missing Out) is a key driver of the stock market rally.
Steve Sosnick, chief market strategist at Interactive Brokers, emphasized that no one wants to miss the rebound; even a tiny piece of good news can trigger a strong market response. Meanwhile, traders are closely watching oil traders—its sharp decline provides a tangible benchmark for the stock market’s rebound.
What does Trump’s unpredictability mean for bears?
Trump’s unpredictability itself has become a distorted market stabilizer: it prevents bulls from fully chasing gains and keeps bears from fully shorting.
Michael Kantrowitz, chief investment strategist at Piper Sandler, perhaps put it best: “The truth depends on perception, and Trump’s capriciousness only increases uncertainty, which helps prevent overconfident bears from pushing the market lower. All this volatility buys the market time and prevents overconfidence—good or bad.”
In Trump’s first year in office, the “TACO trade” became a household term—buying dips was the consensus. But the ongoing Iran conflict is shaking that belief—hostilities are escalating, Iran’s leadership remains in control, and the Strait of Hormuz is still blocked.
Brad Conger, CIO at Hirtle Callaghan, said, “My concern is that this is no longer entirely within Trump’s control, unlike tariffs that can be stopped at any time. Those who are encouraged by Trump’s responses to the market are misguided.”
Jordan Rochester, strategist at Mizuho Bank, pointed out that the chaos in White House messaging leaves markets in a state of confusion.
“The hardest part isn’t predicting the war’s course, but predicting how the White House will communicate and how the market will react,” he wrote in a client report. “We are facing a confused market—uncertain whether this signals an approaching endgame or just another ‘almost done’ show.”
