(Bloomberg) — As President Donald Trump’s tariff plan dragged US stocks lower, the man who for years pointed to the equity market as his barometer of success remained quiet.
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That is, at least, until the market closed with its worst two-day slump since December. Then a glimmer of light emerged from the Trump administration: Commerce secretary, Howard Lutnick, told Fox Business Network the president may offer a pathway for tariff relief for Mexico and Canada on Wednesday.
Immediately, the biggest ETF that tracks tech stocks jumped almost 1% in late trading and index futures contracts surged from their lows.
That’s not to say that a policy reversal is imminent — the Trump administration has sent mixed signals in the past. And it comes in stark contrast to Trump’s statements earlier, when he threatened to raise levies on Canada commensurate with that country’s retaliatory tariffs.
But Lutnick’s comments coming on the heels of another market selloff underscore the idea that Wall Street strategists expect Trump to be attuned to the mood on America’s financial markets, and potentially adjust policy accordingly.
Trump has been “pretty open about there’s going to be some short-term pain for long-term gain, but there is a point where that short-term pain is gonna get to be too much,” said Art Hogan chief market strategist at B. Riley Wealth. “It certainly feels like he will pull back on things. I don’t know if that’s today’s business, but it’s certainly on the short term horizon.”
The thinking is that the US president’s penchant for using the stock market as a report card meant any policy that rattled investors would cause him to quickly ditch those plans. Various Wall Street firms guessed how much pain Trump could tolerate in the S&P 500 Index before retreating. That index level became known as “the Trump put,” in reference to a put option.
Bank of America Corp. strategists had thought the first strike price of the Trump put was the S&P 500’s closing level on Election Day, “below which investors currently long risk would very much expect and need some verbal support for markets.”
And that’s almost precisely where the S&P 500 closed Tuesday, though not before careening well past it in intraday trading. Part of the reason for concern was the president has been significantly less focused on the stock market in his second term in office than his first, so it’s difficult to gauge how much the selloff is weighing on him.
