There was little rest on Wall Street this weekend. There was a lot of anger, anxiety, frustration, and fear.
Anger at President Trump over the brash and chaotic development of tariffs that wiped out trillions of dollars in value from the stock market in two days. Anxious about the state of the private equity industry and other enormous capital that involves global investment. Frustration between the president and his Wall Street elite over his sudden inability to influence his advisors.
And the fear of what might come next.
Hedge funds tallyed their losses and boasted that they had only lost a little. Bankers and lawyers tore through the already sparse calendar for the transaction, deducing that the CEO would not immediately put a major merger or public offering at risk. Large banks have put in emergency scenarios to speculate whether a client would fail the cascade effect of the international trade war.
In a conversation with the New York Times over the weekend, bankers, executives and traders said they were feeling a flashback to the global financial crisis of 2007-8. Excluding the cruel but relatively short-lived market panic that erupted at the start of the coronavirus pandemic, the speed of the market decline last week – stocks fell 10% in just two days – only waves of sales rose when Lehman Brothers collapsed in 2008.
Like at the time, oil, copper, gold, cryptocurrency, and even dollars caught in selling, the range of sudden downdrafts makes Wall Street's biggest players wonder which competitors and counterparties caught off guard. Banks are asking trading clients to post additional funds if they want to continue borrowing money for transactions.
Most hedge funds and other private investors do not share daily or weekly details of their portfolios, so it takes more than weekends before potential damages are known. He spoke on condition of anonymity for not officially notifying investors, one venture capitalist who estimated his portfolio lost $1.5 billion. That's if he can sell his thinly traded investments at all.
“I feel that definitely resembles 2008,” said Ran Zhou, New York hedge fund manager at Electronic Capital.
What's unique about this crisis is that, rather than helping the government pick up fragments, the financial sector sees little hope of immediate rescue. The world order built on interconnectedness is torn apart by the White House itself, and the US position at the epicenter of its network is questionable.
“Pain is self-disability,” said Mike Edwards, a private investor adviser who spent the weekend calling with other investors late Friday.
“You're not going to learn anything from a calculator,” he said in an interview from his Connecticut home on Saturday. “It's about what your neighbor is doing rather than the right price.”
For generations, Wall Street enjoyed the role of advising leaders of both major political parties, and the appointment of Trump's Treasury Secretary, hedge fund manager and former Democrat Scott Bescent hoped the industry had friends near the oval office.
But Bescent avoided the uproar. “The market has consistently underestimated Donald Trump,” he said on Sunday's NBC program, “Meet the Press.”
It's publicly unhappy, even with some of Trump's larger Wall Street defenders, which have little to do.
“It was fun while it continued,” billionaire hedge fund manager Daniel S. Loeb wrote in X last week in a post he later deleted.
William A. Ackman, an outspoken hedge fund manager who supports Trump, made a long post on X on Saturday afternoon at the start of the latest tariffs. “Why is pause meaningless?” he wrote.
“The risk that we don’t do that is that a significant increase in uncertainty will drive the economy into a recession.
Among Ackman's recent bets was Nike, the apparel giant who shifted its supply chain from China to Vietnam after Trump announced a 46% tariff on imports from Vietnam. (Vietnam offers to reduce tariffs on US goods to zero, urging the US to do the same.)
There were several bright spots. Executives of several banks and hedge funds noted that despite the enthusiastic sales, the transaction triggered by the announcement of tariffs had been going on without unexpected glitches.
“Everything is working very smoothly,” he said in an interview with NBC.
A senior executive at a major bank also said there was relief after a call between the bank's regional chief and top executives on Friday night.
For about a month, traders at the $66 billion hedge fund Citadel had reduced the use of leverage and other volatile trading methods as fund founder Kengriffin said he was not allowed to nominate two employees when Trump caused a stir. The hedge fund, which approached the brink of collapse in 2008, was almost flat last week, they said.
In an interview, the investment banker said he was flooded with calls from large companies willing to pay large fees for advice on how to proceed. At Lazard, the bank's message to employees was to be made available to clients, but given the immeasurable uncertainty of the moment, it didn't provide any confidence about what would happen next.
In fact, the true depth of the impact has not yet been determined. Bank of America estimates that profits from S&P 500 companies could be reduced by a third if retaliation is enacted by a country that is subject to Trump's tariffs. But the disastrous rating could change as the country begins to launch an agreement with the White House to lower tariffs.
U.S. transactions fell 14% compared to last year in the first quarter, according to LSEG Data & Analytics, even before the latest tariffs were announced. And in the middle of last week's meltdown, some of the highly anticipated openings that bankers wanted to set the stage for other lists were pulled and suspended, including offering payment giants Klarna and Stubhub's online ticketing business.
One bank executive said he plans to spend more time in Europe.
The two private equity executives hope that by sourizing market turmoil and global relationships, it will make it more difficult for private companies like them to raise money, and in addition to the challenges they already face as a declining trading market, it has made it difficult to return cash to investors. Pressure on these companies only increases because companies investing begin to feel the impact of tariffs, these executives said. Apollo and KKR shares fell more than 20% on Thursday and Friday.
One of the lawyers described herself as “surprising” because she was working on how far her client's stock price fell. The top Goldman Sachs executive briefly summed up his frustration with Trump. Someone has to stop him.
Top leaders in the financial world are silent. JPMorgan Chase CEO Jamie Dimon said two days after Trump's inauguration that he should “survive” the tariff threat as it is national security-friendly. He declined to interview him through a spokesman.
Investor Steve Aisman became famous for his “big short” after foreseen the collapse of the housing market in 2007-8.
“Everyone in the stock market went to college, everyone who went to college took ECON 101 and drummed in their heads that the trade war was bad,” AIDSman said Saturday. He suggested that investors ignored the possibility that the United States could become the best position in any country to thrive in such a scenario, thanks to its economic strength.
Although few companies have publicly discussed the outlook since last week's tariff announcement, major banks, including JPMorgan and Wells Fargo, will be launching investors' calls on Friday to address revenue (and potential customers).
The uncertainty was neatly exemplified by Mr. Roeb, who wrote on Saturday in X:
“It's not a prediction,” he added. “But I'm open-minded,” he added.
