Hiltzik: Are White House insiders using Trump's tariff announcements to play the stock market? It's not that easy
March 13, 2025
In what may be a sign of the times, and not an especially healthy one, my readers and friends recently have been filling my email inbox with questions about whether Donald Trump and White House insiders have been manipulating the stock market with his vacillating announcements about tariffs and the economy.
Speculation along those lines broke into the open Tuesday when Fox News reporter Peter Doocy referred to the overall slide in the stock market since President Trump's inauguration and asked White House spokeswoman Karoline Leavitt, "You're sure nobody here at the White House shorted the Dow?"
(Doocy meant betting on a drop in the Dow Jones industrial average, which fell by more than 4.7% from the last trading day before the inauguration through Tuesday's close.)
Stocks have reached what looks like a permanently high plateau.
Economist Irving Fisher fails to read the market, just before the 1929 crash
Leavitt laughed off his question. "No," she said. "I don't think so."
To be fair, there have been no indications of any such trading by Trump or his acolytes.
In fact, I think it's unlikely, and even impractical that such activity would occur.
Still, the speculation is unsurprising. It may owe more to public doubts about Trump's integrity than about any facts related to his or his circle's trading.
In broad terms, the whipsawing of Trump tariff announcements — on one day he'll imposes heavy tariffs on Canada and Mexico only to backtrack the next — has whipsawed the stock market indexes, which typically have fallen with the tariff announcements and risen with their delay or suspension.
It's not entirely irrational to imagine someone with advance awareness of a policy declaration by Trump placing a bet on how the market will respond.
That said, it's not so easy. "Timing" the stock market historically has been a mug's game. Such efforts often have made even the savviest investors and best-credentialed experts look like idiots.
Indeed, the annals of stock market commentaries are replete with prognostications that, in retrospect, were almost comically wrong. Perhaps the most famous flub was committed by Yale economics professor Irving Fisher on Oct. 17, 1929, when he declared, "Stocks have reached what looks like a permanently high plateau."
Seven days later, on Oct. 24, came "Black Thursday," when the Dow index lost 9% on volume of nearly 13 million shares, more than four times the average turnover. That day, which is viewed as the kickoff for the crash of 1929, was followed by "Black Monday" (a loss of 13%) and "Black Tuesday" — with the 12% loss seeming finally to put an end to the Roaring '20s.
The truth is that if you try to place a short-time bet on the markets based on a single factual nugget, you're playing with fire. My favorite episode purportedly delivering this lesson involves the death of Charles Bluhdorn, the mastermind of the behemoth conglomerate Gulf & Western Industries, which reigned over the stock market from the 1960s through the 1970s.
In its heyday, G&W — which was lampooned by Mel Brooks in his film "Silent Movie" as "Engulf & Devour" — owned scores of businesses including auto parts companies, insurance carriers and Paramount Pictures.
Bluhdorn died in 1983 while traveling on a corporate plane from the Dominican Republic home to New York. The yarn is that company insiders, aware that this would delay the public announcement of his death, assumed that the news would crater the stock, so as soon as they landed they rushed to tell their brokers to sell.
The announcement, however, drove the stock
higher
. That's because Gulf & Western was a hodgepodge the parts of which were more valuable than the whole and Bluhdorn was seen as an obstacle to breaking it up.
Carl Icahn and other corporate raiders piled in, and the stock rose by nearly 40% during the week after Bluhdorn's death. Since then, the company has been broken apart and its entertainment holdings eventually became part of what is today known as Paramount Global.
This story deserves a punch line, and here it is: I cherished it so long that I wasn't sure where I first heard it, though it might have been in Andrew Tobias' indispensable book "
The Only Investment Guide You'll Ever Need
."
Tobias confirmed that for me Wednesday, but added, "The only problem is, I wrote it as a hypothetical. The point of a hypothetical was that even if you have inside information and use it illegally you might lose. You’re the first person in the world to know that [Bluhdorn] has died and you assume the stock will plunge because he’s a genius. So you short it. But instead, the stock zooms because you misinterpreted the reaction."
He also told me, apropos of conjectures about White House insider trading: "This particular kind of trading — hour by hour on tariff changes — doesn’t strike me as likely, but who knows?!"
So let's take a closer look at whether it's even possible.
The short answer is: Perhaps.
Wall Street offers countless ways to trade on inside dope in the hope of not getting caught, including options strategies. .
But two factors are important to keep in mind to help explain why even trying to front-run a White House announcement would be ineffectual.
One is that — as Tobias' Bluhdorn hypothetical warns us — it's not always easy to predict how the market will take any particular news. The other is that the stock market has so many reasons to vacillate just now that tariff announcements may not matter very much.
Let's start with the first factor. To begin with, although it's generally accepted that high tariffs are bad for the economy and thus for stocks, Trump's tariff policies are seldom clear-cut. What tariffs are he imposing, and by how much, and on whom? The answers can change moment by moment.
Furthermore, the markets haven't invariably reacted as one might expect. In matching the daily movements of the Dow average from Inauguration Day to the present against Trump's tariff statements, I found that on occasion the markets rose when tariffs were deemed imminent and fell when the threat was lifted.
Trump announced on Inauguration Day that tariffs on Mexican and Canadian goods would start on Feb. 1; the next trading day, Jan. 21, the Dow rose by 537 points. That said, the first trading day after Feb. 1, when he issued an executive order implementing the tariffs, the Dow fell by nearly 122 points. It rose by 134 on Feb. 3 after he "paused" the tariffs for 30 days.
On Feb. 10, Trump announced plans to increase tariffs on foreign steel and aluminum. The Dow rose by about 167 points that day and an additional 123 points the next day.
Then there's the confusion about tariffs that has prevailed this week. On Tuesday, Trump and his aides signaled that a threatened massive escalation of tariffs on Canadian electricity, steel and aluminum would not take place; the Dow fell by about 478 points anyway.
At the close of trading Wednesday, the day tariffs started on global steel and aluminum imports, the Dow fell 82.55 points, but that was a recovery from its low point for the day, when it was down by about 423 points.
You want to trade that? Be my guest. But tracking these oscillations and trading them day by day or hour by hour can be a full-time job, and most people already have full-time jobs.
The second factor applies to all the conditions that might influence stock prices over the course of a day, week, month or year. Wednesday brought
February's inflation reading
, which came in lower than many analysts expected. That was a relief to the stock market, which rose in early trading, though it didn't assuage fears that Trump's continued trade war may push domestic inflation higher.
For the year to date, the Dow average lost more than 1,100 points, or about 2.6%, through Wednesday's close. The broader market, as represented by the Standard & Poor's 500 index, lost more than 278 points, or 4.7%. The S&P index gained 31.31 points Wednesday.
Many market followers expected the the stock market to turn down temporarily this year after reaching record levels in late 2024. Indeed, the S&P 500 returned more than 25% in both 2023 and 2024, a two-year run that almost always points to at least a temporary pullback. The market's recent poor performance, moreover, may have something to do with a deflation of the artificial intelligence investment bubble of recent years, which may have further to unfold.
Technically, it's possible to "short the Dow," as Doocy mentioned. Rationally, it's very risky. History tells us that anyone who tries it has a good chance of ending up being sorry rather than rich.
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