Wall Street’s Edgy Rally: Hope and Fear in the Trump 2.0 Market

Wall Street is riding waves of optimism – but also navigating through deep uncertainty. President Trump’s bullish remarks have temporarily boosted stocks, yet many on Wall Street remain cautious. Beneath the surface, fears of prolonged volatility and policy unpredictability cast a long shadow over the Trump 2.0 market environment.

Wall Street’s Edgy Rally: Hope and Fear in the Trump 2.0 Market

The most recent stock market comments of President Donald Trump are fueled by brazen optimism, though Wall Street strategists are warning investors not to confuse the rally for stability. Trump, moments after announcing another UK-US trade deal, while suggesting there was more where that came from, and also there was a new tax bill moving its way through Congress just now? Yet underneath the triumphant language, analysts and economists detect turbulence on the horizon.

“You’d better go out now and buy them,” Trump added in his announcement Thursday. “This country will be a rocket ship if you do this.” The market seemed to like the news in the short term, with stocks up and a rising to session highs. But the surge belied larger concerns about volatility, timing and confusion in trade policy.

Confidence in the Short Term, Risks in the Long Term

Yet even as Trump struck an optimistic note, seasoned strategists are cautious.

• “We’re not out of the woods,” said Brian Vendig, MJP’s chief investment officer.
• He noted that it’s not exactly the best time right now to “pound the table” on buying stocks.
• Short-term volatility is likely to continue, he warns.

That concern stems from a few unresolved issues, trade being chief among them. Scott Bessent, the treasury secretary, is ready to sit down with Chinese officials, and the administration is examining a tariff decrease from 145% (on Chinese goods) to 80%. While that could lift spirits in the short term, the timing and execution are up in the air. Trump’s 90-day hiatus on tariffs is due to expire on July 9, giving a very narrow time frame for making progress.

“The chief risk is time,” added Vendig. If contracts are not working well, there may be economic as well as psychological damage – in particular, inventories could become disrupted.

There’s already some damage. Volume compared with April of last year fell in overall trade with the United States, and rose with the nation’s other trade partners. William Dudley, former president of the New York Federal Reserve, cautioned that supply chain frictions are already baked into the system irrespective of any deals to be made in the future.

Uneasy Consumer Confidence

The economy’s hard data is for the most part solid – recent jobs reports have not suggested a notable slowdown. Yet soft data, like consumer sentiment, suggests a far darker economic picture.

• Surveys indicate that American workers have less confidence in their ability to find new jobs than at any point in more than four years.
• Consumer confidence is close to its Covid nadir.

This fragility is manifesting itself in corporate timidity. A few companies have withdrawn earnings outlooks, blaming unpredictable U.S. trade policies. Roger Aliaga-Díaz, Vanguard’s Chief Economist, and lead author of the report, says that it will be difficult to reverse this systemic uncertainty.

Inflation readings, he says, will probably be the first to give an indication of deeper trouble, possibly followed by a slowdown in consumer spending in the later part of the year.

“We’re going to witness that price shock first,” Aliaga-Díaz said. “That is going to eventually translate into a reduction in activity.”

Market Psychology and the ‘Trump Put’

Despite the confusion, Wall Street is holding out hope for a kind of cautious optimism – that Trump won’t allow the market to go down in flames. This idea, often referred to as the “Trump put,” implies that the administration would intervene to stabilize markets when necessary.

Sam Stovall, Chief Investment Strategist with CFRA endorses this view:

“There is hope out there somewhere among the icebergs of uncertainty,” he said. “We can heave a sigh of relief, because we have another 90-day pause now.”

The markets reacted accordingly. Indexes rebounded after news that the United States and China had agreed to a 90-day truce in the imposition of reciprocal tariffs.

• The major averages rose more than 2 percent
• The Russell 2000 index – hit hard during the earlier stages of the trade war – was up more than 3 percent

Yet volatility continues to be the rule. Markets have remained highly reactive to headlines, and traders are balancing on a tightrope between hope and risk. Much of this is up in the air, however, because Trump’s trade policy is so stop-and-go.

Negotiations and Fragility

The face-saving aspect of present talks is telling in its fragility. But neither Washington nor Beijing wants to be seen as caving, making the road ahead more difficult.

Meanwhile, the Treasury Secretary, Bessent, is a steadying influence – if nothing else, an improvement on some of his predecessors. Bessent deserves credit, says Dario Perkins, head of global macro strategy at TS Lombard, for making a second term of Trump “seem ‘market friendly.’”

“Talk of ‘trade deals’ has helped to undo the damage done by [the April 2] Liberation Day,” Perkins said, in a reference to the market decline that set in after news of far-reaching tariffs broke. He foresees a muddle-through scenario in which partial deals and optimistic messaging continue to keep the market afloat – and do nothing to truly resolve underlying issues.

The fact is that any deals with the UK and China may be more spin than substance. Trump seems to prioritize speed and optics – fast wins, not systemic changes. Perkins thinks Trump is after “deals,” even phony ones, to keep the markets stable.

Lingering Economic Headwinds

And even if trade deals advance smoothly, the market has other barriers to clear. Barclays strategists point to:

• Weaker anticipated economic growth
• Reduced corporate profits
• The prospect that the Federal Reserve may put off rate reductions

Inflation is the new focus. The Fed may withhold easing policy if tariffs don’t pose a direct threat of recession.

This transition is already taking place. By Monday, traders were pricing in expectations for the next Fed cut in September, and expecting only two more cuts for the year – a reduction from the prospect of three cuts before.

Now is the time for investors to be defensive, says Keith Lerner, co-chief investment officer at Truist. He likes recession-resistant sectors, such as:

• Utilities
• Communications Services

“Everything that’s happening with Washington – it’s complex,” Lerner said. “Why would we pay a peak multiple” given the wide range of outcomes?

Strategists point to the broad market’s sensitivity to trade policy. Ross Mayfield, an investment strategy analyst with Baird Private Wealth Management, cautions that the possibility of a market pullback remains if the administration takes a more combative posture again.

“I would not say that retesting the lows is off the table,” he said.

A Complicated Forecast

The net message from Wall Street strategists is one of measured caution. There is reason to hope that Trump’s aversion to crashing markets will prevent policy from doing anything that insane. But uncertainty remains. Negotiations with China and other countries are sensitive. There are mixed economic signals. Inflation is rising. And it’s not at all clear what course the Federal Reserve should chart from here.

For the time being, investors appear willing to give the benefit of the doubt to Trump 2.0 – or, at least, are betting that he doesn’t want to be remembered as the man who destroyed the market. But the path forward will need something more than bold talk and temporary deals. Stability will rest on real results, not just on press conferences and promises.

As Dario Perkins noted, “It’s (sort of) funny that the bullish case for Trump 2.0 is basically that it undoes most of what it has done so far.”

Sentiment may drive the markets for the time being, but the fundamentals will, in the end, require answers. One of the biggest economic questions of 2025 is whether the Trump administration will be able to make good on its promises – or at least to kick the can down the road.

Conclusion

While President Trump’s comments and the resulting rallies have sparked short-term hope, Wall Street’s underlying caution is loud and clear. From tariff uncertainties and fragile consumer confidence to the unpredictability of Fed policy and soft trade deal details, the road ahead remains challenging. Investors are advised to stay grounded – the rally may be real, but the risks certainly are too.

FAQs

What is the “Trump put” in financial terms?

It refers to the belief that President Trump would take action to prevent the stock market from collapsing, essentially acting as a market backstop.

Why is July 9 an important date in this scenario?

That is when Trump’s 90-day tariff pause expires, creating a deadline for significant trade progress, especially with China.

Which sectors are considered defensive in this market climate?

Utilities and Communications Services are seen as safer, recession-resistant options for cautious investors.

What are the main risks analysts are highlighting?

• Ongoing market volatility
• Unclear Fed policy direction
• Unpredictable trade negotiations
• Low consumer confidence and soft corporate outlooks

Are recent trade deals expected to solve market instability?

Not entirely. Many analysts believe these deals are more about optics and short-term sentiment than substantive structural changes.

Read More On Website

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Trump’s Trade Tirade: Apple, India and the New Tech Cold War

Reference

Markets are putting their trust back in Trump, as long as trade deals keep going

Wall Street strategists say stock market’s pain won’t end with Trump trade deals