Wall Street has proved incredibly resilient to instability, and while consumer confidence has dipped, shares have soared

It was a dark Friday for Wall Street on 27 March. Oil prices were climbing and the war with Iran raged on. Markets responded accordingly, with the Dow and Nasdaq entering correction territory, falling more than 10% below their peak, after a month of selloffs.

Fast forward seven weeks later to 13 May, and the situation in Iran only looked marginally better. Oil prices were high, and the strait of Hormuz was still closed. Peace talks with Iran seemed tenuous, even with the pressures of high gas prices. Donald Trump on Wednesdaysaidhe was “not even a little bit” motivated by Americans’ financial situation to end the war.

And yet, stock markets have not only recovered from their losses – they are thriving.

Even before the start of the war, the US stock market proved incredibly resilient to political and economic instability. The market has shrugged off the Covid-19 recession and generational-high inflation, absorbed Russia’s invasion of Ukraine and increasingly turned a blind eye to Trump’s tariff spats. Everyday Americans continue to struggle with an affordability crisis and consumer confidence has crashed, but the markets just keep going up and up.

Yes, Wall Street still has its down days. But the tech-heavy Nasdaq index has continued to surge amid continued investment in AI. The index has gone up 11% since the start of the year – nearly half of the gains that it saw last year. The Dow and S&P 500 continue to bump close to record highs.

Each time investors shake off the latest shock and reach new highs, questions arise: what is driving this phenomenon, and how long can this bull market last?

Some economists point to a mindset that investors have embraced – that the president will back off of his most extreme policies: Trump Always Chickens Out, or Taco.

Backtracking threats has been a hallmark of Trump 2.0, particularly when it comes to tariffs and Iran. When Trump announced his slate of “liberation day” tariffs, he delayed implementing them hours after they were announced. He similarly threatened a 25% tariff on eight EU countries when he was angry about annexing Greenland. Those tariffs were also called off.

Now, even as Trump says the Iran ceasefire is on “life support”, markets still keep going up.

Source: Drudge Report