In a perfect world, Congress and the courts would keep President Donald Trump's executive branch in line by balancing out his portion of the country's power base. Absent their effectiveness, the financial markets may be the last line of defense to moderate Trump's behavior, according to new analysis in The Bulwark.
Writer Matt Johnson posited that even as these vital institutions cave in to Trump's demands, "one important check remains: There’s nothing Trump can do to bend global financial markets to his will."
As an example, Johnson wrote that Trump's tariffs and the resulting stock market chaos were somewhat quelled last week when Trump was "bullied into submission" by the bond market. Trump announced that he was backing off his trade war because people were "getting yippee," but a massive sell-off in U.S. bonds led a CNN analyst to call it a rare economic "red flag" that even Trump couldn't ignore.
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Allison Morrow, a senior writer for CNN Business, said last week that "Normally in times of economic turmoil, we would see stocks sell off and investors go to bonds. That didn't happen. We saw investors selling stocks and bonds. And that is really a red flag because it's only happened a handful of times in history and its a signal that investors can't really see which way the economy is going."
In Johnson's Bulwark article, he called it "a sad commentary on the decay of America’s democratic institutions that the market is now the most powerful check on Trump. While financial markets are subject to manipulation and can be captured by both irrational exuberance and irrational fear, they are usually extremely efficient information processors."
Johnson continued, "Markets are a proxy for what people really believe is true about the world—MAGA members of Congress can spout all the familiar pro-Trump slogans about a golden age for America, but the real measure of the public’s confidence in Trump’s economic stewardship is how they adjust their portfolios. Markets provide immediate feedback on Trump’s actions. They can’t be flattered or pressured. They can’t be swayed by alternative facts."