Trump's one sentence hits back to the original form, why is the market so easily fooled? --- Master Charles P. Kindleberger review

A single news report dares the market to bet on a ceasefire, but a single "still fighting for two to three weeks" from Trump immediately restores the original reality. This article breaks down how "hope trading" tricks people in.

Title: The Bubble of Hope, the Iron Hammer of Reality! Kindleberger: 72 Hours of Frenzy and Panic.

This week, global macro traders experienced a "limit-pushing" event worthy of a place in financial psychology history. In just 72 hours, the market played out extreme blind enthusiasm of "believing the wind" and "sudden awakening" of intense panic to the fullest.

The story begins on Tuesday, March 31. At that time, Reuters cited a report indicating Trump seemed ready to "end the Iran war." Although the Strait of Hormuz was still tightly blocked, with no oil flowing out, Wall Street, already tortured by high oil prices and stagflation, seemed to grasp a lifeline.

Traders didn't care about the truth of this report—they just wanted an excuse. So, a frenzy called "hope trading" began. The market quickly incorporated the "conflict will soon end" perfect script into asset prices: crude oil was sold off, and the stock market took a breather.

However, this house of cards built on sand didn't even last 48 hours.

On Thursday, April 2, the iron hammer of reality struck heavily. Trump explicitly stated in a televised speech that military action against Iran would continue for "two to three weeks."

Just one sentence, and the optimistic "maybe a quick ceasefire" trade from a few days earlier was completely reversed, triggering an epic correction of reality.

Market reactions were extremely violent and bloody. On April 2, WTI crude oil surged over 13% in a single day, and Brent crude rose nearly 8%. Meanwhile, global stock screens were instantly overwhelmed by bearish sentiment, the dollar strengthened due to safe-haven flows, and gold weakened under liquidity contraction and a strong dollar.

Why is the market so easily ignited by a rumor and so quickly snapped back by reality?

Faced with this phenomenon where prices are completely detached from physical reality, torn back and forth by emotions and narratives, we need to call upon the master of financial history—Charles P. Kindleberger.

In his classic work "Manias, Panics, and Crashes," Kindleberger completely rejects the "Efficient Market Hypothesis." He points out that markets are never precise weighing machines but are emotional pendulums easily influenced by "narratives."

If Kindleberger were to review this 72-hour drama today, he would calmly tell you: "Don't blame the market's stupidity, because human nature is inherently craving certainty. In extreme crises, any bit of good news will be amplified into fanatic belief."

He perfectly embeds this week's market volatility into his "Crisis Rhythm" model:

- Step one is displacement: the March 31 Reuters report broke the market’s rigid expectation of a "long-term war," providing a new narrative.
- Step two is frenzy: traders fear missing out on the "peace dividend," and funds start shorting crude oil and going long stocks at all costs. At this point, the market is no longer trading on fundamentals but on the consensus that "others will believe in a ceasefire."
- Step three is panic and collapse: Trump’s televised speech on April 2 punctured the balloon like a needle. When subsequent evidence proved that "hope" was wishful thinking, optimism instantly turned to hesitation, which in one second evolved into a reckless stampede retreat.

Kindleberger would sharply point out: the biggest mistake on Monday and Wednesday this week was mistaking "politicians' words" for "physical de-escalation." Until the oil tanker can safely exit the Strait of Hormuz, all hope trades are essentially walking on a knife’s edge.

Within Kindleberger’s "Frenzy and Collapse" framework, let’s deeply decode the market on April 2. Behind those astonishing numbers are blood-stained chips.

First, why did WTI crude oil surge over 13% in one day?
It’s not just because Trump’s words changed supply and demand fundamentals by 13%. More than half of this increase was actually a "short squeeze."
Hope traders who believed rumors and shorted oil on March 31 found themselves trapped after Trump’s speech on April 2. To cut losses, they had to buy back oil in a very short time. This panic-driven "buying squeeze," combined with the physical reality of extreme shortage of spot oil, created a pillar capable of blowing up countless hedge funds.

Second, why did gold weaken?
With a clear expectation that the conflict would last another two to three weeks, safe-haven sentiment should have pushed gold higher. But in reality, gold declined again.
Kindleberger explains the liquidity logic behind this: when stock markets plunge and oil prices soar, inflation expectations spike again, but the Fed’s rate cuts are firmly blocked, and the strong dollar becomes the only king. When the market shifts instantly from "hope" to extreme panic "safe-haven," everyone only wants to hold high-yield dollar cash. As a non-interest-bearing asset, gold once again becomes a victim of "liquidity and strong dollar" double squeeze.

This week’s market scene proved in the cruelest way that, after frenzy subsides, cash (the dollar) is the only safe haven.

Through Kindleberger’s perspective, we see the underlying psychology of this 72-hour "believe first, doubt later, rise first, collapse later" cycle.
Markets habitually jump the gun, but the physical world always settles slowly and coldly.

Standing at the close on this Friday, all traders face an extremely dangerous situation. The upcoming Easter long weekend means major European and American markets will be closed or semi-closed.

In Kindleberger’s theory, liquidity exhaustion is the best breeding ground for panic spreading. The violent re-pricing on Thursday night was actually the last concentrated statement from major funds this week: they entered the weekend with extreme unease, holding cash or defensive positions.

Next week, what will determine whether prices can recover is no longer anonymous media reports or fragile hopes.
In the days of low liquidity ahead, real pricing power will be in the hands of Middle Eastern artillery, shipping bans, and any sudden escalation news over the weekend.

Kindleberger’s final advice for the long holiday:
"Never gamble on geopolitical risks you cannot control during liquidity droughts and holidays."

This week’s "hope trade" has already cost countless people dearly. Make sure you don’t become cannon fodder again in the next "reality correction."
Market chaos, respect reality.

Markets are risky; invest cautiously. This article does not constitute personal investment advice#Gate广场四月发帖挑战