Will the Markets Check Trump’s Power?

The president-elect follows the markets closely. He bragged frequently about how well stocks performed in his first term in office, and said they had boomed this year in anticipation of his return to the White House.

Since Election Day, a great deal of financial analysis has been devoted to one central question: How will the new Trump administration affect the markets?

But another important question isn’t being asked as frequently: To what extent can the markets serve as a check on the power of the president? With Republican control of the House and Senate and a conservative majority on the Supreme Court, Donald J. Trump will face fewer curbs from the nation’s political institutions than he did in his first term. Given this vacuum, it’s reasonable to wonder whether the markets will play an outsize role.

I’d say that in this stage of the presidential transition, the evidence is mixed. Yes, in a tenuous and unpredictable way, the markets are likely to influence the next administration’s decision-making and, occasionally, serve as a check on some of Mr. Trump’s most immoderate behavior.

But I wouldn’t go far with this. For one thing, financial markets have come to discount — you might say “normalize” — actions and statements that would set off strongly negative reactions if made by other public figures. And Mr. Trump’s more pugnacious statements are often viewed as initial bargaining positions. Still, from the standpoint of the markets, Mr. Trump can probably go quite far in enacting his campaign promises as long as corporate profits rise and the economy grows.

The events of the last week or so are a case in point. Mr. Trump set out to calm the markets with appointments of urbane experts known for a nonideological approach to finance, but also unleashed a global storm with the announcement that he planned to impose new 25 percent tariffs on Canada and Mexico and add a 10 percent tariff on China. Mr. Trump seems intent both on mollifying the markets and on disregarding their message when it is inconvenient. So far, this tactic is working.