In a recent commentary, notable investor Michael Burry highlighted what he perceives as Donald Trump’s primary weakness: a pronounced fear of declining stock prices. Known for his role in the financial maneuvering during the 2008 housing market collapse, Burry expressed this sentiment in a brief note on his Substack platform, asserting, “The stock market is Trump’s kryptonite.”
Burry indicated that Trump’s approach to foreign policy, specifically regarding Iran, has shifted drastically. Initially aimed at instigating a “revolution,” Trump’s focus, according to Burry, has transitioned to a pragmatic concern: exiting the conflict before stock prices plummet further. “It’s a shame that Americans died for this,” Burry added, reflecting on the human cost of shifting political motivations.
This commentary came in light of reports that Trump was contemplating a reduction in US military involvement in Iran after significant damage had been inflicted on the country’s missile capabilities. Burry connected this strategy to economic interests as well, noting that Iranian oil’s potential re-entry into the market coincided with a downturn in stock prices.
In a follow-up note, Burry observed, “Trump now gives Ultimatum on Strait of Hormuz. He would love to win this before the market opens.” This comment pointed to a sudden shift in Trump’s stance from indicating that the conflict was essentially resolved. The fluctuation in US stocks—particularly the S&P 500, which recently dipped below 6,600 points after peaking above 7,000 in January—appears to be a significant factor in this discourse.
The broader economic context cannot be overlooked. The ongoing conflict in the Middle East, coupled with attacks on critical energy infrastructure, has severely disrupted oil flows through the pivotal Strait of Hormuz. These tensions have contributed to steep increases in oil prices, with Brent crude and West Texas Intermediate crude spiking by 66% and 60%, respectively, since the beginning of the year. These surging prices have heightened affordability concerns for American citizens and rekindled inflation fears as the country approaches the midterm elections in November.
Trump’s campaign promises centered on prioritizing American interests and avoiding prolonged military engagements, such as those witnessed in Iraq and Afghanistan. Burry’s insights suggest a contradiction between these pledges and the current geopolitical maneuvers.
Underpinning Burry’s analysis is the observation from other investors that Trump’s reactions to market volatility often lead him to retract or alter his policies, leading to the coined term “TACO trade”—an acronym for “Trump Always Chickens Out.” Through his commentary, Burry reinforces the idea that Trump’s vulnerabilities are intrinsically tied to market performance, a theme he has revisited since transitioning to writing from hedge fund management.
