| Wall Street’s brief burst of euphoria that sent stocks on a two-day surge seems to have quickly disappeared.
And with equity futures now falling on the latest trade war headlines, it’s underscoring a new reality that’s been confounding investors for weeks: All the price moves now — the sudden surges and the stomach-churning tumbles — are being driven by White House policies that seem to shift constantly and with little to no forewarning, making it nearly impossible to predict where stocks, bonds or the dollar will go next. “Markets are wildly trading off of policy,” said Marko Papic, BCA Research chief strategist. “Which is a fancy way of me saying they’re trading off of tweets.” Wall Street veterans are used to rapidly adjusting to unexpected turns of events, as was the case in recent years when inflation soared or when the US economy powered past the subsequent steep interest-rate hikes by the Federal Reserve. But three months into Trump’s second term, he has single-handedly driven the type of dizzying financial-market reversals usually reserved for crises like the bursting of the real estate bubble or the onset of the pandemic. In this case, though, rather than a complex shock that traders race to model, it’s stemming from his willingness to gamble with the economy by trying to retool the rules of international trade and to push the bounds of presidential power, as he did last week by lashing out at Fed Chair Jerome Powell for not cutting interest rates.
The volatility has created a gulf between professional money managers who have shifted to the sidelines and individuals who have been snapping up shares, betting on a rebound. “In a world of extreme uncertainty and rapidly shifting policy norms, the risk of market dislocations and regime breaks remains high,” wrote George Saravelos, global head of FX strategy at Deutsche Bank. He said conditions are ripe for a long-term decline in the dollar. —Alexandra Semenova, Esha Dey and Carmen Reinicke | 
