Attack the Week (ATW)

May 11, 2025

Sunday Thoughts

If I had time to return to university and study again, I would pick psychology. It’s a subject that has always fascinated me, and I was a keen follower of behavioural finance lectures at my alma mater. Some of the books I still go back to from time to time are listed below. Still, there is continued research on a highly complex matter spanning micro and macroeconomic studies.

Thinking, Fast and Slow – Daniel Kahneman

• A foundational book on how two mental systems—fast, intuitive thinking and slow, rational thinking—affect decision-making, risk, and judgment in markets and life.

Misbehaving: The Making of Behavioral Economics – Richard Thaler

• A fascinating and often funny journey through the rise of behavioural economics, filled with real-world market examples of irrational behaviour.

Predictably Irrational – Dan Ariely

• Explores why people consistently make illogical financial decisions, backed by clever experiments and practical insights.

Behavioral Finance: Psychology, Decision-Making, and Markets – Lucy Ackert & Richard Deaves

• A more academic and structured approach to behavioural finance, perfect for students or professionals seeking a formal grounding.

Beyond Greed and Fear – Hersh Shefrin

• One of the earliest comprehensive texts on behavioural finance, showing how psychological forces influence investors and markets.

The Psychology of Money – Morgan Housel

• A highly readable, modern look at how people think about money, wealth, and long-term investing success—simple yet profound.

Your Money and Your Brain – Jason Zweig

• Combines neuroscience and investing, revealing how your brain chemistry can sabotage (or improve) financial decisions.

Irrational Exuberance – Robert J. Shiller

• A Nobel laureate's deep dive into speculative bubbles, showing how emotion and psychology drive unsustainable market trends.

While I am a keen student of psychology in financial markets, through my technical analysis (see my piece above) and my models, I am also keen on deciphering human motivation. I have spent the past few weeks and months analysing Trump’s behaviour and trying to develop a framework for analysing how he ticks. Needless to say, this is likely an impossible task, but why not give it a go?

Analysing the reigning US president through a psychological lens —particularly his communication style, behaviour patterns, and public persona — reveals characteristics commonly associated with narcissistic traits, authoritarian tendencies, and a transactional worldview shaped by both personal history and media strategy.

Trump has often exhibited behaviours consistent with narcissistic personality traits: grandiosity, hypersensitivity to criticism, an inflated sense of self-importance, and a constant need for admiration. These are reflected in his speech patterns (frequent use of superlatives like “tremendous,” “the best”), his self-promotion (“no one knows more about X than I do”), and his sensitivity to perceived slights (even from late-night hosts or athletes). Narcissistic individuals often conflate personal success with public adoration, making dissent or critique feel like a personal attack.

Trump's use of social media is more than impulsive — it served as a direct, unfiltered channel for dominance signalling. His “truths” often combined provocation, simplification, and emotional appeal, a style that resonates with followers but frustrates critics. Psychologically, this aligns with populist communication tactics: bypassing traditional media, creating an “us vs. them” narrative, and framing himself as both victim and saviour. The aggressive tone and frequent boasting reflect a need to dominate public discourse, often through performance rather than policy substance.

Another psychological theme is promissory hyperbole - making grand promises without concrete planning or execution. From “build the wall” to “repeal and replace,” Trump often favoured slogans over strategy. This may stem from a transactional mindset developed in business and reality TV, where appearance often trumps delivery. His past shows a pattern of rebranding setbacks as successes, a behaviour seen in individuals who prioritise ego maintenance over long-term accountability.

Trump’s persona was forged in the tabloid-driven world of 1980s New York, mentored by figures like Roy Cohn (who emphasised “never apologise, attack back harder”). This shaped a worldview where conflict is power, and public perception is currency. Psychologically, his behaviour suggests a deep investment in an image of dominance, which may compensate for insecurity or fear of perceived weakness. He is highly reactive to status threats and often reframes losses as victories stolen, which is characteristic of externalisation — blaming others to protect ego integrity.

How does that translate into trading and investing? I always thought his bullying tactic worked for some, but that he would face situations where his plan won’t stick. He will potentially have to face this scenario with China in due course. So far, his statements generate attention and immediate reactions, but they have started to lack the follow-through necessary to drive lasting market trends. As investors begin to recognise the gap between rhetoric and action, Trump's words will increasingly be viewed as noise rather than an actionable signal, particularly by institutional players who rely on policy substance over media theatrics.

Source: TruthSocial

The market has adapted to Trump's style, with volatility around his comments tapering as credibility and predictability declined. Looking at his latest “truth” above about a reset with China, one can look through the capital letters and conclude that there is very little substantive detail but vibrant emotional tone, persuasive language, and impression management. As markets have bounced back and reversed some extreme pricing seen in April after some walk-backs of the initial rhetoric, his impact from here should diminish. I wouldn’t be surprised if markets largely disregard his comments in a few months. Until then, we shall continue to follow his every step. I think this is more parody than a sincere political approach. Stay nimble out there.

Let’s now read Macro D’s latest thinking before briefly scanning the week’s upcoming calendar. We then revisit some charts, which give us some interesting setups. As always, we conclude with a review of the output from our asset allocation model.

Let’s go!