Steve Eisman, the investor recognized for his role in the financial crisis depicted in “The Big Short,” has issued a cautionary message to investors: Avoid taking unnecessary risks, as the market may face further declines. Eisman, who notably shorted the housing market before the 2008 downturn, believes that Wall Street has yet to fully account for the negative impacts of President Donald Trump’s tariffs.
During an appearance on Finance Newso’s “Fast Money” on Monday, Eisman remarked, “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.” He emphasized that Trump’s unconventional approach to trade is causing confusion among many. Still, Eisman expressed skepticism that the current trade tensions would escalate into what he termed “tariff Armageddon.”
Eisman suggested that if nations act rationally, Canada and Mexico could be expected to negotiate favorably with the U.S. “Those two countries hold no cards. Now, Europe is not much better,” he stated, suggesting that the outcome would likely favor Trump’s demands if reason prevails.
On the same day, the Dow Jones Industrial Average experienced unprecedented volatility, with a record swing of 2,595 points. The index dropped as much as 1,703 points before finishing the day down 349 points, while the Nasdaq Composite managed a slight gain of 0.1%. The S&P 500 also fell by 0.2%.
Eisman acknowledged the market challenges, stating, “I’m long only. I’ve lost plenty.” He reflects on the broader implications of free trade, particularly for individuals in affected regions. “GDP is not just a number. It’s people. If you’ve traveled through the Midwest and the South, it doesn’t look so good,” he pointed out, noting the disparity of benefits that came with trade agreements like NAFTA under President Clinton.
Highlighting the political dimensions, Eisman noted that Wall Street should have anticipated Trump’s tariff actions. “He has told you that he was going to do this for years, and now he has gone and done it. Everybody is shocked that he fulfilled his promise. They didn’t take him seriously,” he said.
Eisman concluded by addressing the unpredictability of political actions, emphasizing, “In a trade war, everybody will suffer. The U.S. will suffer the least.”
