As President Donald Trump’s administration continues to develop and push its economic agenda, uncertainty surrounding his leadership style is causing businesses to hesitate and reconsider their investment strategies said economist Craig Shapiro in his latest hypothesis.
What Happened: Macro strategist at the Bear Traps Report, Shapiro said that Trump’s governing approach is beginning to resemble that of a “Mafia Don”.
“Everyone has to get in line first to talk to the Don,” he said in an X post adding that “initial euphoria” around Trump’s win and the Republican sweep was fading.
“We are now moving more into the uncertainty phase for business leaders who are more likely to wait and see how things go, rather than invest/hire ahead of hopeful changes in the legislative front.”
Businesses were unsure about the direction of key policies and economic reforms according to Shapiro. He said that factors like tariffs on Canada and Mexico, the unclear future of trade agreements, and fluctuating government spending, fueled the “uncertainty”.
He also highlighted in his analysis that the range of the volatility index, VIX has widened since 2020. The week before a long weekend the volatility drops by 3% on average, while it increases to an average of 5.8% after a long weekend. “Buying volatility post holiday weeks has been a fruitful exercise over the past several years. This still seems like a good idea again to me, he said.
See Also: Will Markets Be Closed For Presidents Day? Here's What Investors Should Know
Why It Matters: The “Mafia Don” metaphor, according to Shapiro, isn't just about Trump's decision-making but also the broader impact it has on businesses.
He explained that in a climate where businesses must wait for approval before moving forward, many are left questioning whether investing now is worth the risk, especially when the rules of the game continue to shift unexpectedly.
“Notion that you have to go to Trump first seems like a problem for businesses who may find themselves in limbo, waiting to get in line for that conversation with the Boss,” Shapiro said.
According to him, economic growth is likely to be slower but the current stock market valuations reflect optimistic performance. Shapiro added that “trade uncertainty” will exist and reiterated his old analysis where he implied that tariffs are the "only way" to fund tax cuts without expanding the federal deficit.
“We are setting up for a period of nominal growth disappointment vs expectations with a market that is priced for perfection. And that’s before the likely further contractionary results of the budget process are revealed where tariff revenues continue to seem like an obvious revenue plug to aid the tax cut desires. Trade uncertainty will be with us for a while,” he said.
Price Action: On Friday, the SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ which track the S&P 500 and Nasdaq 100 indices, closed mixed. SPY fell 0.0049% to a value of $609.7, and QQQ was up by 0.42% to end at a value of $538.15, according to Benzinga Pro data.
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