What is the market—Trump warns of abnormal market psychology phenomena

By the end of 2024, despite the announcement of strong economic indicators with GDP growth rates significantly exceeding expectations, the stock market did not show the expected upward reaction. President Trump harshly criticized this abnormal phenomenon, pointing out fundamental issues in market mechanisms. Markets should inherently reflect the actual state of the economy, but currently, market psychology is dominated by concerns over policies, creating a situation where positive news does not necessarily lead to positive outcomes.

Strong GDP but No Reaction in Stock Prices — The Discrepancy in Market Mechanics

The GDP growth rate for the third quarter reached 4.2%, well above the market forecast of 2.5%. Normally, such strong economic indicators should stimulate investor sentiment and lead to rising stock prices. However, the reality is different. Wall Street investors, even when seeing robust economic data, are rather concerned. This is because strong economic growth could prompt the Federal Reserve (Fed) to raise interest rates, which market participants believe would help curb inflation.

Markets should ideally evaluate corporate earnings and economic growth performance, but currently, expectations of monetary policy dominate market psychology. An abnormal situation has persisted for decades where positive news results in stagnation or decline in stock prices.

The Vicious Cycle of Interest Rate Policies and Inflation Concerns

The abnormal reaction of the market stems from ambiguity in policy judgments. President Trump points out, “Wrong policies cause inflation. A strong market itself does not necessarily lead to inflation.” Despite inflation tending to stabilize naturally within economic mechanisms, he argues there is a risk that excessive interest rate hikes could suppress growth.

He urges the new Fed Chair not to raise interest rates unnecessarily when the market is doing well, and to avoid overly suppressing growth. What Trump wants to see is a market based on economic fundamentals — one that rises when it should, falls when it should, functioning according to the true market mechanism.

Trump’s Warning on the Essence of “Market Mechanics”

President Trump stated, “If the ‘geeks’ of monetary policy try to destroy the market’s rise, this country can never become strong,” sharply criticizing policies that suppress the market. When there is a disconnect between policymakers and market participants, markets do not function properly.

Markets are not just fluctuations of numbers; they only function healthily when economic realities and policy transparency align. Even with good data and positive news, uncertainty in policies can dampen market sentiment. Trump’s warning highlights the fundamental distortion of market mechanics and emphasizes the importance of policymakers respecting market mechanisms and creating an environment conducive to growth.