The new Trump administration is coming in hot, with mass deportations of undocumented immigrants and threats of triggering a global trade war among its immediate priorities. Fighting continues in Europe and the Middle East. And bond traders are scaling back bets on lower interest rates as the US economy risks a fresh bout of inflation.
But despite all of these risks, investors seem largely unperturbed, with the S&P 500 Index setting another record just this week. Traders are piling into the riskiest parts of the market, too, with the small-capitalization Russell 2000 Index nearly doubling the S&P 500’s performance over the past two weeks and approaching its first record since 2021. Meanwhile, the Cboe Volatility Index is at levels that historically indicate serenity among traders.
