Trump could trigger new market shock, investors warn

Investors and senior banks worry that US stock highs give companies a false sense of security, downplaying the economic threats of Trump’s impending tariffs.

Some investors and bankers, including Amundi and JPMorgan Chase’s executives, say they already see signs of complacency in the market. They argued that traders are overly optimistic, betting the US president will scale back from destabilizing economic policies, a confidence they think is misplaced.

For starters, JPMorgan Chase executive Jamie Dimon had commented, “Unfortunately, I think there is complacency in the market.” Vincent Mortier, chief investment officer of Amundi — Europe’s biggest asset manager, shared a similar comment, warning of a growing confidence in the Taco narrative (Trump Always Chickens Out).

Trump escalates tariff threats as markets gamble he’ll blink

A former top Trump official expressed a similar view, noting that markets are now confident Trump will abandon his tariff policies. However, he added that he doesn’t believe Trump will back down, stating, “Trump has always liked tariffs.”

The S&P 500 share index has climbed 30% since April, recovering from earlier lows brought on by Trump’s proposed reciprocal tariffs. The stock rally picked up after he paused the tariff policies, lowering levies on countries to the baseline 10%.

This week, Trump disclosed that his administration is considering additional tariffs on multiple countries. He sent letters to at least 20 countries, including its trading allies Japan, Canada, and Brazil, informing them of possible new tariffs, unless they discuss and agree on trade deals. If Trump follows through on his threat, Brazil could easily see a 50% levy.

Still, equities have largely brushed off his most recent tariff threats. Despite the markets’ stance, the US president has held firm on his plan to enforce steep “reciprocal” tariffs starting August 1, warning that no extension will be granted without trade agreements. So far, only the UK, China, and Vietnam have struck deals with the US.

Research teams at several Wall Street banks expect Trump to ease his most aggressive tariffs in order to avoid further market disruption. This outlook has largely helped maintain stability in stock and bond markets while lowering borrowing costs for companies.

Tariffs are not the only concern, say US investors

Some bankers and investors, however, are concerned that the President may stick to his proposed levies. Robert Tipp, head of global bonds at PGIM, asserted that the Taco narrative may fail in such an unpredictable environment. He added, “The tariffs that have ended up sticking are somewhat high. And yet markets have cruised on. Will there be a day of reckoning?”

Some have also argued that tariffs are not the only issue investors should be wary of. The Big Beautiful Bill that was recently signed into law has analysts worried about ballooning national debt. Some economists forecast the legislation could contribute trillions of dollars to the federal debt.

A senior executive at a leading US bank argued that the Trump administration’s policies and tax legislation have eroded confidence in the US as a stable and dependable store of value. According to the executive, investors are reevaluating their exposure to US assets more seriously than ever before, with many privately conceding that the country’s traditional “risk-free premium” has faded.

He insisted that his biggest concern is the growing US deficit, warning that more taxes would eventually harm the dollar.

Another senior executive at a global lender agreed the US has lost its “safe haven” status. He argued that while the US is still a critical market, it’s become more expensive to do business in the country. He also raised concerns over the emerging political tensions, especially over the rule of law. In his opinion, the Trump administration’s attacks on law firms, the media, and universities have been detrimental to the country’s status.