Is the Stock Market Resilient or Complacent?
Quick Announcement: Time is our most important asset in life. For that, I’m so grateful you choose to spend some of it reading my posts.
This week, I’m taking some time off with my family to explore Chicago and Indianapolis. I hear their children’s museums are top-tier. And yes, my mom from El Salvador is joining us. It’ll be her first time visiting both cities!
I’ll be back next week.
In the meantime, here’s today’s post…
It’s not hard to make money in the market. What is hard to avoid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges. It’s an obvious lesson, but one frequently ignored. – Burton Malkiel
There’s a fine line between resilience and complacency. Lately, it seems the U.S. stock market may be walking that line.
President Donald Trump has floated a new round of tariffs that, if enacted, would significantly increase trade tensions with key partners.
Among the proposals:
A 50% tariff on Brazilian imports
A 35% tariff on Canadian goods
A 30% tariff on goods from the EU and Mexico (if no trade deal is reached by August 1)
A 200% tariff on pharmaceuticals
A 50% tariff on copper
Trump has historically viewed tariffs as a primary tool of economic leverage and political negotiation.
Whether these are enacted in full or in part, the risk is that they will lead to more protectionism, higher input costs, and potentially higher inflation.
Staying on the topic of inflation, June inflation was released yesterday.
According to the Bureau of Labor Statistics, inflation increased 0.3% in the month, bringing the 12-month inflation rate to 2.7%.
These figures were in line with expectations and still on the higher end of what the Federal Reserve is comfortable with.
The chances of any interest rate changes are very low based on the inflation report.
This doesn’t sit well with the Trump administration, which has been vocal about wanting rate cuts.
Several Trump-aligned advisors have openly questioned the Fed Chair Jerome Powell’s leadership, suggesting he should step down when his term ends in May 2026 or even sooner.
If the Fed’s independence comes into question, that could push yields higher as investors demand a premium for political risk.
Any disruption in Fed leadership could test market stability.
The Market’s Reaction
Risk means more things can happen than will happen. – Elroy Dimson
How have the markets reacted to this flurry of uncertainty?
They’ve barely blinked.
Stocks continue to press to all-time highs. Bond yields remain subdued.
Volatility in stocks (via the VIX) and Treasuries (via the MOVE index) is low.
In short, the financial markets appear indifferent. That’s mainly because many of these risks haven’t materialized into lasting market damage.
However, this kind of apathy can precede abrupt volatility and sharper declines.
JPMorgan’s CEO Jamie Dimon weighed in recently:
“Unfortunately, there is complacency in the market [about tariffs] and (they are) a little desensitized…There is a lot of happy talk. One day, you may see a different reaction….I think the possibility of those higher rates are higher than anyone else thinks. If the market is pricing a 20% chance, I’m pricing in a 40% to 50% chance. I would put that as a cause for concern.”
Dimon is famously cautious about systemic risks.
He has to be because he runs the largest bank in the country.
That said, many of his past warnings have yet to materialize into full-blown crises.
So why does the market seem unfazed?
Markets may be betting that Trump will ultimately dial back his tariff threats.
Or they believe that companies will continue adapting to policy shifts and perhaps even offset the impact with productivity gains from AI and automation.
Final Thoughts
Periods of calm often encourage excessive risk-taking, as market participants begin to underestimate the likelihood and scale of future shocks.
That may be where we are now.
Whether we are witnessing strength or sleepwalking into surprise remains to be seen.
But it’s worth remembering that the absence of fear is not the same as the absence of risk.
Keep learning. Keep growing. Keep going.
Now here’s what I’ve been reading, listening, and watching:
John D. Rockefeller (a private man who the public knows very well now) on Founders podcast
Just Keep Buying by Nick Maggiulli
The Seven Frequencies of Communication by Erwin Raphael McManus
The 5 Types of Wealth by Sahil Bloom
Children’s book (I have a 5-year old): Sleepytime by Joe Brumm (highly recommend this Bluey episode)
Here’s what I’ve been writing:
