Steve Eisman became an investor household name after his big bet against the housing market before the 2008 financial crisis went viral. Now, he’s using that experience to explain today’s trade situation and what it means for Wall Street. Eisman, a former senior portfolio manager at Neuberger Berman, has a dire warning for investors. Specifically, he counsels them to be careful about President Trump’s tariff policies.
This month, Eisman debuted his podcast, “The Eisman Playbook,” where he shares his insights on different market environments, strategies and conditions. According to him, Wall Street was derelict in its duty to consider the ramifications of Trump’s tariff tactics. Eisman is a touch optimistic that the current trade challenges won’t devolve into what he calls “tariff Armageddon.”
Eisman states, “He has told you that he was going to do this for years, and now he has gone and done it.” To him, the trade policy changes weren’t surprising. Too many investors weren’t ready for these shifts.
As Eisman traveled through the Midwest and parts of the South, he saw firsthand the devastation these areas experienced economically. He acknowledged that the average American in these regions isn’t experiencing the positive impacts of today’s booming economy. He emphasized, “If countries are rational, Canada and Mexico would come to the United States and basically beg, ‘We’ll do what you want.’” This declaration accurately captures his view that cool-headed negotiating smarts would save America a big boatload of cash on the trade front.
Here, Eisman opens up about what worries him about today’s environment. He predicts that the U.S. will be hit harder than other nations currently engaged in trade wars. He draws parallels between today’s trade dynamics and the era when President Clinton implemented the North American Free Trade Agreement and engaged with the World Trade Organization, which ushered in a significant bull market.
Eisman went on to lament the current president’s rejection of the established trade paradigms started by Clinton. So it’s “jarring” to him that Trump’s administration doesn’t accept these basic tenets of trade. In addition, he highlights that Wall Street is still dealing with $hit Hits the Fan type scenarios with tariff threats still hanging in the air.
“The issue is that everybody of our social class took Econ 101, and we were all taught the same thing: Trade good, tariffs bad, trade war terrible,” Eisman remarked, highlighting the prevailing sentiment among economists regarding trade.
He cautions investors not to take on outsized risk in this volatile market. He thinks there’s more bad news to come. Just last week, the Dow Jones Industrial Average notched its biggest point drop ever, falling 2,595 points at one point during the day. Interestingly, the S&P 500 index dropped 0.2% on the same day.
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