Talking nonsense and being capricious? Trump tells "Wall Street short sellers": lying is shameful but useful!

U.S. President Trump once again triggered global market turbulence with a social media post. Despite his claim about a ceasefire in the Middle East being immediately denied by the parties concerned, Wall Street still chose to "buy".

This shows that in the eyes of the market, the president's fear of a market crash is more important than the authenticity of his statement, and "unpredictability" itself has become a strong medicine to restrain the bears.

According to CCTV News, Trump posted on social media Monday, announcing that the deadline to bomb Iranian energy facilities would be postponed by five days and claimed that both sides were conducting "very good and productive dialogue" toward a "comprehensive, thorough resolution" of the conflict. This statement instantly reversed pessimism in the markets, leading Wall Street to its most volatile trading day since the outbreak of the U.S.-Iran conflict.

After the market opened, the S&P 500 surged as much as 2.2%, marking the biggest rise since May. The Dow Jones Industrial Average jumped more than 1,000 points during trading. Meanwhile, crude oil prices plunged over 13%, Brent crude fell below $100 per barrel, and the yield on U.S. 2-year Treasury notes sharply retreated from its high to 3.79%.

(Brent crude falls below $100)

However, less than an hour after the tweet, Iranian officials denied that negotiations were underway. This scene was almost identical to two weeks ago—when Trump declared that "the war is completely over," which also caused a brief rebound in stocks and a drop in oil prices.

This replay forced Wall Street to confront a deeper issue: what is the market really trading?

The answer is not peace, but Trump’s market bottom line. Investors interpret the statement as a signal: the president’s aversion to falling markets will ultimately prevent him from carrying out the most extreme threats. In addition, Trump’s unpredictability itself has become a market stabilizer: it keeps bulls from chasing too aggressively and bears from shorting recklessly.

TACO trades return to the market

At 7:05 a.m. EST Monday, Trump posted on social media, announcing that the 48-hour deadline for military action against Iranian power facilities was delayed by five days, citing "very productive dialogue" and the hope for a "complete and thorough resolution".

Once the news broke, the market immediately reversed: Brent crude fell below $100 per barrel, with a drop of over 13%; U.S. stock futures soared; two-year U.S. Treasury yields plunged 0.22 percentage points to a low of 3.79%; European stocks and bonds also rebounded sharply from previous declines.

After the market opened, the S&P 500 index rose as much as 2.2%, the largest single-day gain since May; the Dow rose over 1,000 points during the session. However, as Iran clarified and denied talks were underway, the market started to give back gains. By the close, the S&P 500 narrowed its gain to about 1.2%, the Dow ended up about 630 points (1.4%), and the rally in Treasuries also faded.

(Intraday performance of major U.S. stock indices)

Wall Street is not unfamiliar with this scene. Two weeks ago, Trump told the media "the war is completely over," which immediately caused a similar sharp rally in stock markets and a corresponding pullback in oil prices. That rally likewise failed to last.

According to media analysis, part of Trump's statement was exactly to appease investors shaken by the war, aiming to avoid another painful selloff at the beginning of the week. Last Friday, the S&P 500 had recorded its longest weekly losing streak in a year.

Despite doubts about truthfulness, why did Wall Street surge?

For Wall Street, whether Trump’s declaration is genuine may not matter. The sharp rebound was not because investors blindly believed the “ceasefire” talk, but because they saw it as a guarantee: the president’s strong dislike of bad market data will ultimately stop him from taking more extreme military action.

Since the war broke out a little over three weeks ago, the global economy has been under pressure. The blockade of the Strait of Hormuz has cut off key energy supplies, surging energy costs have brought new inflation shocks, and more than $2.5 trillion has been wiped from global bond markets, causing the largest single-month drop in over three years. Meanwhile, the yield on 2-year U.S. Treasuries has surged half a percentage point since the war started, constraining the Fed's room to lower rates.

Tom Garretson of RBC Wealth Management said: "Trump has obviously been trying to suppress oil prices, but once again, perhaps it’s the bond market that is forcing him to change his stance."

Marko Papic, Chief Strategist at BCA Research, stated: "If this isn’t resolved in the next 7 to 10 days, we’re facing a huge shutdown in the global economy. Today's statement shows that Trump understands the real economy could go off a cliff."

Some analysts also noted that current trading logic is more like a Keynesian ‘beauty contest’.

Daniel Alpert, Managing Partner at Westwood Capital, pointed out that the market isn’t trading on facts, but trading on expectations of other participants. Even if investors suspect it’s a lie, as long as they think others will see it as bullish and buy in, they’ll follow suit.

Additionally, Fear of Missing Out (FOMO) is a major factor driving the stock market higher.

Steve Sosnick, Chief Market Strategist at Interactive Brokers, stressed that nobody wants to miss a rebound—any bit of good news can trigger a strong market response. Moreover, equity traders are closely tracking oil traders; the sharp drop in oil prices provides a tangible benchmark for the stock market’s rebound.

What does Trump’s unpredictability mean for the bears?

Trump's unpredictability itself has become a distorted market stabilizer: it keeps bulls from going all-in and stops bears from shorting at will.

Michael Kantrowitz, Chief Investment Strategist at Piper Sandler, may have summed it up best: "Truth is a matter of perception, and Trump’s unpredictability only increases uncertainty, which helps stop overconfident bears from pressing the market lower. All this unpredictability buys the market time and prevents overconfidence—good or bad."

In Trump’s first year in office, the "TACO trade" was ingrained in the market, and buying the dip became consensus. However, the Iran war is shaking that belief—hostilities keep escalating, Iranian leadership remains in command, and the Strait of Hormuz is still blocked.

Brad Conger, Chief Investment Officer at Hirtle Callaghan, said: "My worry is this is no longer entirely within Trump’s control; it’s not like tariffs that can be stopped at any time. Those feeling encouraged because Trump responds to the market, their confidence is misplaced."

Mizuho Bank strategist Jordan Rochester noted that the White House’s chaotic messaging has left markets struggling to find direction.

"The hardest thing isn’t predicting the course of the war, but forecasting the White House’s communication style, and how much the market will react," he wrote in a client report. "We’re facing a confused market—not knowing if this is a credible sign of the endgame approaching, or just another ‘almost done’ performance."

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