Forward Guidance Newsletter Segment

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After erasing their “Trump bump” gains, US equities showed surprising calm on Wednesday following a week of tariff-driven selloffs.

The day’s mild gains followed President Trump’s spirited address, in which he defended his trade policies, leading some investors to expect intervention from authorities. Uncertainty looms over whether this intervention will take the form of a “Fed put” or “Trump put,” though investors likely welcome any signs of relief for stock prices.

Trump’s address did not indicate concern over falling stock values; instead, he suggested that short-term pain would yield long-term benefits. He appeared unconcerned about specific S&P 500 levels triggering a reversal of aggressive policies, emphasizing that tariffs are aimed at “protecting the soul of our country.”

Meanwhile, the administration appears to be managing investor sentiment. Commerce Secretary Howard Lutnick stated that Trump is considering offers from Mexico and Canada, suggesting a middle ground.

Trump’s meeting with Canadian Prime Minister Justin Trudeau addressed tariffs, although he remains firm about levies similar to those on Mexican goods until actions are taken against fentanyl trafficking. He did grant a one-month exemption for Ford, GM, and Stellantis concerning tariffs on Mexico and Canada.

This communication initially calmed the markets, with the S&P 500 up 0.9% by 2 PM ET and the Nasdaq Composite rising 1.1%.

Estimates on pain thresholds for the S&P 500 vary, with Bank of America strategists suggesting a “Trump put” strike price at around 5,720, near earlier lows for the index. Others anticipate that any single-day loss exceeding 5% could spur policy changes from Trump.

Nicolas Colas from DataTrek Research contends that the real figure to monitor is market volatility. A VIX above 36 typically signals a “Fed put,” though Trump’s volatility trigger could differ. Colas believes significant relief in markets is unlikely until the VIX exceeds 27, stating current levels are around 23.

The Federal Reserve’s next interest rate decision is scheduled for March 19, coinciding with the Blockworks Digital Asset Summit in New York City.