'They’re Laying the Groundwork for Things to Get Worse': Trump's Economic Messaging Fails to Reassure Wall Street
A discussion featuring market analyst Julia Coronado, who expresses that investors are concerned about the increased potential for disruption posed by Trump's second term.
TroibNews 
Just two months into Donald Trump’s second term, Wall Street is feeling jittery. Julia Coronado, the president and co-founder of the economic consulting firm MacroPolicy Perspectives, attributes this apprehension to investors and executives who had initially believed that Trump would steer clear of making significant changes that could disrupt the market's upward trend.
“We had a pretty great setup for Trump,” Coronado said in an interview with PMG Magazine, reflecting the sentiment prevailing among investors. “Why would he mess with that?”
As a former Federal Reserve economist with experience at BNP Paribas and Graham Capital Management, Coronado is a highly regarded economic consultant whose client roster includes asset managers, hedge funds, and banks. I had a conversation with her while she was en route to the University of Texas at Austin, where she serves as a clinical associate professor of finance at the McCombs School of Business.
Typically, Wall Street thrives on stability, but Trump's early focus on unpredictable policies — such as inconsistent tariffs, government cutbacks, and strict immigration measures — suggests that he is willing to pursue a much more disruptive agenda this time. He has indicated that a recession remains a possibility, especially after markets reacted strongly to recent major tariff announcements.
“Investors are tuning into the fact that — at a minimum — Trump 2.0 is going to be quite a bit different from Trump 1.0,” Coronado noted. “He’s not as sensitive to the stock market as we thought.”
This conversation has been edited for brevity and clarity.
Wall Street and consumers generally prefer economic policies that are predictable and risk-free. Currently, volatility prevails. So, with Trump back in office, what certainties exist in the economy?
What am I certain of? In terms of the policy outlook, I’m certain of absolutely nothing.
I’m uncertain about the future trajectory of interest rates. I have baseline scenarios in mind, but we're experiencing significant and intentional disruptions to the established norms.
Federal Reserve Chair Jerome Powell recently mentioned that there is little confidence in any economic forecast currently. What impact does this have on the markets?
When market confidence is low, it often leads to volatility, with periods of drastic price adjustments. In an environment of high uncertainty, active investors typically hold back on making substantial capital investments or large bets. This leads to markets being more influenced by passive strategies and trend-followers. Consequently, we witness periods of repricing followed by intervals of stability.
This is the dynamic we seem to be encountering now. Investors are realizing that Trump 2.0 will likely differ from its predecessor. There are tangible risks to growth, particularly given that Trump might not be as attuned to stock market performance as previously believed.
A lot of investors expected a scene reminiscent of Trump 1.0. Why did Wall Street find Trump's new agenda so surprising, especially since he didn't conceal it?
There was a prevailing belief that his actions wouldn't be substantial or significant enough to disrupt a generally robust growth environment. We had a pretty great setup for Trump. Why would he mess with that?
One of the most common inquiries we receive is: “What’s the overarching strategy here?” This is still unclear to many investors and business leaders.
What risks do you associate with Trump's policies for the economy or the markets? Are these risks more about execution, or the unpredictability of his approach?
There are multifaceted risks at play right now. For example, if you cut spending across several sectors and they subsequently halt hiring and investment, could that trigger a recession? Will tariffs lead to inflation that suppresses consumer demand and shrinks profit margins? These are standard economic ramifications we can analyze with clarity.
However, there are additional elements to consider. One prominent risk is the erosion of the rule of law.
This administration is actively pursuing actions that face judicial challenges, and they are disregarding court rulings. This could impact the economy and market operations. Although it's hard to predict the timing and specifics, a cornerstone of U.S. exceptionalism has been stability, adherence to the rule of law, clear contractual agreements, and a solid operating environment. We are currently seeing significant disruptions in that stability.
For instance, [Trump signed an executive order] that grants more control over the Treasury’s payment systems. This could theoretically enable the administration to prioritize payments during a debt ceiling crisis or selectively decide whom to pay based on political preferences. Ostensibly, they claim it's to combat waste, fraud, and abuse; however, most would agree there was little waste to begin with in Treasury operations.
We are crossing pivotal boundaries concerning the rules and structures that have governed our system, making the U.S. a riskier counterparty. How does this affect the term premium? Typically, when economic risks increase, you see Treasury bonds rally as investors seek safety.
The breakdown of the rule of law and changing how our financial system operates introduce risks that are quite challenging to quantify.
Trump has not dismissed the possibility of a recession. Treasury Secretary Scott Bessent mentioned that the private sector is already in a recession and the economy needs a “detox” from government expenditure. How do you interpret this economic messaging?
It appears they're setting the stage for more adverse outcomes. They are trying to convey a narrative that short-term pain will yield longer-term benefits. This might be accurate, but the economy is a dynamic entity. Once it starts moving in reverse, it can continue downhill. Macro economies are not easily controlled; just look at the Fed.
This stands in contrast to the initial narrative they conveyed when they assumed office. They suggested, “It’s going to be amazing on Day One.” Now, they're saying, “Well, we might need to inflict some damage before you can reap the rewards.”
On the positive side for the administration, there are some stimulative policies I can identify: deregulation...
Deregulation?
...in energy production...
I'll pause you there. Where exactly does deregulation manifest?
That's an excellent question.
Certainly in finance. You could see an uptick in M&A activity and a loosening of banking regulations. That's evident.
But when you ask: “What does that encompass? Which sector will be most affected?” it’s not entirely clear. It's a convenient catch-all term, the usual Republican mantra.
You mentioned energy. We witnessed considerable energy production under Biden. Currently, the challenge for energy production and exploration stems from low prices relative to break-even costs. Yes, more land can be auctioned off, but is drilling currently profitable with oil prices so low? Production was already high due to the lower prices.
What are your thoughts on the idea of an overarching plan to reshape the global economy? What's your perspective on the so-called “Mar-a-Lago Accord,” which suggests the government may weaken the dollar's value by converting existing Treasury bonds into longer-term debt?
These are two distinct inquiries. The Mar-a-Lago Accord concept involves compelling countries to hold non-marketable, long-term debt. America's leverage stems from military might, economic size, and dollar supremacy.
My understanding was that significant tariffs were part of this strategy.
Correct, tariffs serve as a negotiating tool.
The authors suggest this could effectively reconfigure the economy by promoting American manufacturing and realigning supply chains...
Tariffs were intended to act as leverage to encourage these swap agreements — as mentioned in the paper authored by Stephen Miran [Trump’s chair of the Council of Economic Advisers]. It’s somewhat of a “have your cake and eat it too” proposition, something Miran acknowledges.
Historically, the U.S. dollar became the reserve currency due to its liquidity, transparency, rule of law, and market reliability. If the plan is to essentially coerce nations into holding non-marketable, long-term debt, what implications does that have for the broader market?
Will interest rates increase or decrease as a consequence? Might holders of marketable securities flee because we’re presenting the U.S. as an unreliable counterpart, akin to China, where agreements could be abruptly enforced or altered under threat of tariffs?
Furthermore, when evaluating our trade deficit, we must consider the service surplus. This consists of tourism, education, and healthcare services that we export, all of which are being directly targeted.
Are we prepared to sacrifice medical research, professional consulting, and financial services to boost domestic manufacturing at the cost of productivity and U.S. exceptionalism? Will this encourage people to maintain their faith in the dollar?
I believe there are numerous internal inconsistencies within these proposals.
Consumer sentiment and confidence in the economy were lacking under Biden and continue to be under Trump. Yet, the fundamentals such as low unemployment and consumer spending remain stable. How significant are these indicators for your outlook?
Sentiment indicators can be tricky because their correlation with actual activity varies.
Recessions don’t materialize abruptly. In a vast, intricate economy like the U.S., recessions typically result from a complex mix of factors tipping it over the edge. While sentiment is a risk factor, it would need to coincide with actual developments, such as layoffs.
There was some expectation for an uptick in hiring post-election as uncertainty diminished. However, it appears that uncertainty has only heightened, leading us to conclude that hiring will not see any significant boosts.
This increased uncertainty renders the economy more susceptible to other shocks and developments.
Can changes in sentiment significantly shift the American economy? Or do they predominantly affect American politics?
I reside in Texas, not the Beltway. When I go out — walks, meals, events, or football games — it’s not as if everyone is constantly despondent or at odds with one another. That observation gives me hope.
Sophie Wagner for TROIB News
“We had a pretty great setup for Trump,” Coronado said in an interview with PMG Magazine, reflecting the sentiment prevailing among investors. “Why would he mess with that?”
As a former Federal Reserve economist with experience at BNP Paribas and Graham Capital Management, Coronado is a highly regarded economic consultant whose client roster includes asset managers, hedge funds, and banks. I had a conversation with her while she was en route to the University of Texas at Austin, where she serves as a clinical associate professor of finance at the McCombs School of Business.
Typically, Wall Street thrives on stability, but Trump's early focus on unpredictable policies — such as inconsistent tariffs, government cutbacks, and strict immigration measures — suggests that he is willing to pursue a much more disruptive agenda this time. He has indicated that a recession remains a possibility, especially after markets reacted strongly to recent major tariff announcements.
“Investors are tuning into the fact that — at a minimum — Trump 2.0 is going to be quite a bit different from Trump 1.0,” Coronado noted. “He’s not as sensitive to the stock market as we thought.”
This conversation has been edited for brevity and clarity.
Wall Street and consumers generally prefer economic policies that are predictable and risk-free. Currently, volatility prevails. So, with Trump back in office, what certainties exist in the economy?
What am I certain of? In terms of the policy outlook, I’m certain of absolutely nothing.
I’m uncertain about the future trajectory of interest rates. I have baseline scenarios in mind, but we're experiencing significant and intentional disruptions to the established norms.
Federal Reserve Chair Jerome Powell recently mentioned that there is little confidence in any economic forecast currently. What impact does this have on the markets?
When market confidence is low, it often leads to volatility, with periods of drastic price adjustments. In an environment of high uncertainty, active investors typically hold back on making substantial capital investments or large bets. This leads to markets being more influenced by passive strategies and trend-followers. Consequently, we witness periods of repricing followed by intervals of stability.
This is the dynamic we seem to be encountering now. Investors are realizing that Trump 2.0 will likely differ from its predecessor. There are tangible risks to growth, particularly given that Trump might not be as attuned to stock market performance as previously believed.
A lot of investors expected a scene reminiscent of Trump 1.0. Why did Wall Street find Trump's new agenda so surprising, especially since he didn't conceal it?
There was a prevailing belief that his actions wouldn't be substantial or significant enough to disrupt a generally robust growth environment. We had a pretty great setup for Trump. Why would he mess with that?
One of the most common inquiries we receive is: “What’s the overarching strategy here?” This is still unclear to many investors and business leaders.
What risks do you associate with Trump's policies for the economy or the markets? Are these risks more about execution, or the unpredictability of his approach?
There are multifaceted risks at play right now. For example, if you cut spending across several sectors and they subsequently halt hiring and investment, could that trigger a recession? Will tariffs lead to inflation that suppresses consumer demand and shrinks profit margins? These are standard economic ramifications we can analyze with clarity.
However, there are additional elements to consider. One prominent risk is the erosion of the rule of law.
This administration is actively pursuing actions that face judicial challenges, and they are disregarding court rulings. This could impact the economy and market operations. Although it's hard to predict the timing and specifics, a cornerstone of U.S. exceptionalism has been stability, adherence to the rule of law, clear contractual agreements, and a solid operating environment. We are currently seeing significant disruptions in that stability.
For instance, [Trump signed an executive order] that grants more control over the Treasury’s payment systems. This could theoretically enable the administration to prioritize payments during a debt ceiling crisis or selectively decide whom to pay based on political preferences. Ostensibly, they claim it's to combat waste, fraud, and abuse; however, most would agree there was little waste to begin with in Treasury operations.
We are crossing pivotal boundaries concerning the rules and structures that have governed our system, making the U.S. a riskier counterparty. How does this affect the term premium? Typically, when economic risks increase, you see Treasury bonds rally as investors seek safety.
The breakdown of the rule of law and changing how our financial system operates introduce risks that are quite challenging to quantify.
Trump has not dismissed the possibility of a recession. Treasury Secretary Scott Bessent mentioned that the private sector is already in a recession and the economy needs a “detox” from government expenditure. How do you interpret this economic messaging?
It appears they're setting the stage for more adverse outcomes. They are trying to convey a narrative that short-term pain will yield longer-term benefits. This might be accurate, but the economy is a dynamic entity. Once it starts moving in reverse, it can continue downhill. Macro economies are not easily controlled; just look at the Fed.
This stands in contrast to the initial narrative they conveyed when they assumed office. They suggested, “It’s going to be amazing on Day One.” Now, they're saying, “Well, we might need to inflict some damage before you can reap the rewards.”
On the positive side for the administration, there are some stimulative policies I can identify: deregulation...
Deregulation?
...in energy production...
I'll pause you there. Where exactly does deregulation manifest?
That's an excellent question.
Certainly in finance. You could see an uptick in M&A activity and a loosening of banking regulations. That's evident.
But when you ask: “What does that encompass? Which sector will be most affected?” it’s not entirely clear. It's a convenient catch-all term, the usual Republican mantra.
You mentioned energy. We witnessed considerable energy production under Biden. Currently, the challenge for energy production and exploration stems from low prices relative to break-even costs. Yes, more land can be auctioned off, but is drilling currently profitable with oil prices so low? Production was already high due to the lower prices.
What are your thoughts on the idea of an overarching plan to reshape the global economy? What's your perspective on the so-called “Mar-a-Lago Accord,” which suggests the government may weaken the dollar's value by converting existing Treasury bonds into longer-term debt?
These are two distinct inquiries. The Mar-a-Lago Accord concept involves compelling countries to hold non-marketable, long-term debt. America's leverage stems from military might, economic size, and dollar supremacy.
My understanding was that significant tariffs were part of this strategy.
Correct, tariffs serve as a negotiating tool.
The authors suggest this could effectively reconfigure the economy by promoting American manufacturing and realigning supply chains...
Tariffs were intended to act as leverage to encourage these swap agreements — as mentioned in the paper authored by Stephen Miran [Trump’s chair of the Council of Economic Advisers]. It’s somewhat of a “have your cake and eat it too” proposition, something Miran acknowledges.
Historically, the U.S. dollar became the reserve currency due to its liquidity, transparency, rule of law, and market reliability. If the plan is to essentially coerce nations into holding non-marketable, long-term debt, what implications does that have for the broader market?
Will interest rates increase or decrease as a consequence? Might holders of marketable securities flee because we’re presenting the U.S. as an unreliable counterpart, akin to China, where agreements could be abruptly enforced or altered under threat of tariffs?
Furthermore, when evaluating our trade deficit, we must consider the service surplus. This consists of tourism, education, and healthcare services that we export, all of which are being directly targeted.
Are we prepared to sacrifice medical research, professional consulting, and financial services to boost domestic manufacturing at the cost of productivity and U.S. exceptionalism? Will this encourage people to maintain their faith in the dollar?
I believe there are numerous internal inconsistencies within these proposals.
Consumer sentiment and confidence in the economy were lacking under Biden and continue to be under Trump. Yet, the fundamentals such as low unemployment and consumer spending remain stable. How significant are these indicators for your outlook?
Sentiment indicators can be tricky because their correlation with actual activity varies.
Recessions don’t materialize abruptly. In a vast, intricate economy like the U.S., recessions typically result from a complex mix of factors tipping it over the edge. While sentiment is a risk factor, it would need to coincide with actual developments, such as layoffs.
There was some expectation for an uptick in hiring post-election as uncertainty diminished. However, it appears that uncertainty has only heightened, leading us to conclude that hiring will not see any significant boosts.
This increased uncertainty renders the economy more susceptible to other shocks and developments.
Can changes in sentiment significantly shift the American economy? Or do they predominantly affect American politics?
I reside in Texas, not the Beltway. When I go out — walks, meals, events, or football games — it’s not as if everyone is constantly despondent or at odds with one another. That observation gives me hope.
Sophie Wagner for TROIB News
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