One step at a time.. | Forexlive

It’s going to be a somewhat fun but enduring four years, isn’t it? Trump’s inauguration day was loud and you wouldn’t expect anything less. But how did it really impact markets?

For one, the dollar felt a pinch early on as he seemed to be building a better rapport with China president Xi. The TikTok rescue and potentially softer stance on tariffs weighed on the greenback while bolstering risk sentiment.

And staying on the tariffs front, he didn’t quite go full guns blazing to start with and that’s added good news. The bond market has responded in kind since last week and bond buyers are starting to recover back some ground. 10-year Treasury yields are now down to 4.538%, highlighting a modest drop from the highs just above 4.80%.

So, what have we really learnt from Trump’s first day in charge?

Well, the best way to think about it is taking one step at a time. And that’s what markets look to be doing as well.

You can always count on Trump to put on a show and speak with big words. He is the man of the people after all.

However, while he may talk the talk, it’s another thing to walk the walk. Two weeks ago, we already had reports on Trump aides looking to tone down the tariffs approach. It was much expected that Trump will come out to deny that but as mentioned then:

“I wouldn’t be surprised if he does sort of deny or overwrite whatever the report here is saying in due time. As for when the tariffs do get implemented, whether or not they do walk the walk, that’s a different matter. For now, it’s all about the conceptualisation of it.”

It’s all about delivering the idea in a world that is engulfed by the social media echo chamber. Even if he tones down his approach, people will have long forgotten about it because he will be delivering on tariffs – just not quite as bombastic as what he made it out to be initially. And the people won’t care.

For markets though, it’s a whole other story.

Traders will take to pricing in the best or worst case scenario more often than not and then walk it back from there. And that is arguably what is happening now.

Does that mean Trump will not go big on tariffs from here? No, he very well still could. That’s the unpredictable and uncertain nature of him being in charge.

But a big lesson in managing expectations when it comes to trading Trump headlines, it is to take things one step at a time. It can all change in a blink of an eye and it can all come crashing down if he changes his mind on anything, even the slightest.

That’s a key takeaway from his first four years in charge and we’ll have another four more to look forward to now.