Why is the market high yet refuses to crash? The 'distorted market' created by populism and QE
"The market is high. But why does it remain 'hard to crash'?" On The Real Eisman Playbook, Steve Eisman hosted Jason Trennert (Strategas) to discuss the intersection of policy, politics, and the markets. The program delved into the "hidden foundations" currently driving the market, including the Trump administration's tariff cards, the rise of populism, the "distortions" left behind by QE (quantitative easing), and even the question of whether crypto is truly a substitute for gold.
1. Even if "tariffs are a negotiation," they still hit the market as a shock
The current market is in a classic risk-off mode: stocks down, gold up, oil up, and crypto down. During the program, Trennert noted that while Trump's tariff suggestions are "always negotiating," he pointed out the pattern where the market is shaken in the same way "every time."
The important point here is not whether the tariffs are implemented, but that the volatility itself stems from the wavering "predictability" of policy. Companies postpone decisions on supply chains and capital investment, while investors recalculate "which assets can withstand inflation." As a result, the program suggests focusing on sectors conscious of "inflation resistance" (resources, materials, industrials) and "hard assets."
2. The essence of populism is the feeling that "life isn't getting better"
Trennert's analysis is clear. The populism that has dominated politics over the past decade was born from disappointment with the "social experiments" of both the left and the right. He cites as symbolic examples the left's free trade (e.g., trade with China via the WTO) and the right's foreign intervention (the Iraq War).
In his words, ordinary people want "jobs, not cheap T-shirts." In other words, even if a policy is "macro-economically correct," if it deviates from the reality of household finances, resentment accumulates.
The implication for investment is simple: the pressure to "please the crowd" easily induces fiscal expansion and strengthens inflationary tendencies. That is why Trennert speaks of gold as a hedge against the decline in monetary discipline.
3. Crypto "does not behave like gold"—doubts about the investment thesis
This is a key point of the program. On risk-off days, "gold goes up, but crypto falls more than the NASDAQ." From this observation, Eisman hits the core.
"If it should go up in theory but goes down, what is the 'thesis' for holding it?"
Trennert's answer is cautious. While the explanation of a supply cap may hold, he views it as leaning more toward a "vessel for speculation" than having "intrinsic value," with technology, privacy, confidence, and market depth acting as bottlenecks.
4. 2026 will be strong, but the sustainability of 2027 depends on "investment results"
Trennert is bullish on the economy in 2026. His reasoning is that immediate stimuli like tax cuts and rebates will run concurrently with supply-side measures that encourage domestic investment.
However, the issue is "whether that can increase supply capacity at a speed that outpaces inflation." In other words, it is fast to inflate demand, but slow for factories, infrastructure, and productivity to catch up. This time lag creates uncertainty heading into 2027.
5. The "distortion" created by QE: financial engineering displaces real investment
"The market is too high, yet it doesn't fall." As background, Trennert cites the Federal Reserve's balance sheet expansion and the normalization of the "backstop." Companies issue corporate bonds on the premise of low interest rates and boost EPS through stock buybacks—in his words, "financial engineering rather than real engineering."
There are multiple side effects.
Private equity that leveraged with low interest rates loses its exit, leading to a pile-up of unsellable companies (it only looks like "low vol" because the price is not visible)
Refinancing at 3% mortgage rates creates "inability to move," draining market liquidity
"If you're in trouble, we'll save you" is repeated, paralyzing risk perception
Furthermore, to illustrate the dangers of government intervention in pricing, he cites John F. Kennedy's 1962 criticism of U.S. Steel's price hikes (which was perceived as "anti-business" at the time).
6. The next frontier: the "convergence" of prediction markets and financial markets
In the final stages, Trennert describes what he finds 'most interesting right now' as prediction markets. In an era where individuals 'have stronger opinions on politics and policy than on sports,' those opinions are becoming trades.
Furthermore, this sector is beginning to link up with existing financial infrastructure. For example, CME Group and FanDuel have announced the launch and expansion of prediction market products across multiple states.
Additionally, it has been reported that Intercontinental Exchange (the parent company of the New York Stock Exchange) is moving forward with investments and partnerships with Polymarket.
Trennert sees a duality here: a 'future where hedge funds use these for risk hedging,' and the reality that 'they could become a hotbed for insider trading, necessitating regulation.' It is both the market's 'next growth story' and an area where rule-making is struggling to keep pace.
7. Summary for individual investors: The 'three perspectives' shown in this episode
Politics is not noise, but a structural factor that determines inflationary tendencies
Verify whether assets 'move according to logic' (there are days when crypto is not gold)
The less visible the price, the more risk remains hidden (beware of the 'low volatility' of PE)
Finally, I would like to touch upon the point where Trennert spoke about his own battle with illness (multiple myeloma and renal dysfunction), stating he is 'in the process of recovery.' The introduction, which viewers received as a 'human story,' helped in understanding the dense discussion.
