Trump’s normalisation of market chaos can only go so far

It is one of the oldest sayings on Wall Street, yet the adage “markets hate uncertainty” has never stood up to scrutiny. Like most maxims, it has a ring of truth but is a gross oversimplification.What is indisputable, however, is that for several decades investors took major economic, financial and political trends for granted. For a long period beginning in the 1980s, the world was relatively predictable. Many economists dubbed this era “the great moderation”. Others pointed to the impact of globalisation and the peace dividend following the end of the Cold War.Yet a year after US President Donald Trump began his second term, this world no longer exists. Although political and economic risks increased significantly in the aftermath of the 2008 global financial crisis, Trump has ripped up the geopolitical, economic and financial rule books.In fact, confusion is one of Trump’s most important tactics, along with deflection and coercion. In the past year, his assaults on truth, norms, the rule of law, the global trading system and the independence of the US Federal Reserve have broken so many guardrails that investors have become desensitised to Trump’s egregious actions.The more Trump undermines the foundations of US institutions and the global economy, the less his attacks shock. Chaos has become normalised. The findings of Bank of America’s latest global fund manager survey on February 17 showed that inflation, a sharp rise in bond yields and geopolitical conflicts were among the four biggest “tail risks” in markets.Yet not only have fears of a “hard landing” for the global economy – which were rife when Trump launched his tariff blitz – tapered off, the percentage of respondents anticipating a “soft landing” has fallen sharply. Strikingly, 52 per cent of those polled expected “no landing” in the next 12 months.