After a Blowout Week, Wall Street Decision Makers Brace for More Chaos

There was little rest on Wall Street this weekend. There was plenty of anger, anxiety, frustration, and fear.

Anger at President Trump for a brash and chaotic rollout of tariffs that erased trillions of dollars in value from the stock market in two days. Anxiety about the state of the private equity industry and other colossal funds with global investments. Frustration among Wall Street’s elite at their sudden inability to influence the president and his advisers.

And fear of what may come next. Major banks played out emergency scenarios to guess whether one client or another would fail in the cascading effects of an international trade war.

In conversations with The New York Times over the weekend, bankers, executives and traders said they felt flashbacks to the 2007-8 global financial crisis, one that took down a number of Wall Street’s giants. Leaving out the brutal, but relatively short-lived market panic that erupted at the start of the coronavirus pandemic, the velocity of last week’s market decline — stocks fell 10 percent over just two days — was topped only by the waves of selling that came as Lehman Brothers collapsed in 2008.

Like then, the breadth of the sudden downdraft — with oil, copper, gold, cryptocurrencies and even the dollar caught up in the sell-off — has Wall Street’s biggest players wondering which of their competitors and counterparties was caught off guard. Banks have asked trading clients to post additional funds if they want to continue borrowing money to trade — so-called margin calls that haven’t nearly reached the level of a generation earlier but are nonetheless causing unease.

“It definitely feels similar to 2008,” said Ran Zhou, a New York hedge fund manager at Electron Capital, who canceled weekend plans and put on a button-up shirt to sit in his Manhattan office and read Chinese news sources to get the jump on China’s plans.

There were some bright spots. Several bank and hedge fund executives pointed out that, despite the frenzied selling, trading in the wake of the tariff announcement had so far proceeded without any unexpected glitches, a point that Mr. Bessent also made on Sunday. A senior executive at one major bank also said there was relief after a call on Friday night with the bank’s regional heads and top executives that nobody could point to a specific client in danger of immediate implosion.

The true depth of the impact is yet to be determined. Bank of America estimates that profits for companies in the S&P 500 may fall by one-third if retaliatory levies are enacted by the countries subject to Mr. Trump’s tariffs. But the dire assessments could change, if countries begin to strike agreements with the White House that will lower the tariffs.

Two private equity executives said they expected that market turmoil and souring global relations would make it more difficult for private firms like theirs to raise money, adding to the challenges they are already facing as a dwindling deals market has made it harder to return cash to their investors. Pressures on those firms will only increase as the businesses they invest in begin to feel the impact of tariffs, these executives said. Shares of Apollo and KKR fell more than 20 percent on Thursday and Friday.

One prominent deals lawyer described himself as “flabbergasted” as he grappled with how far the share prices of his clients had fallen. A top Goldman Sachs executive summed up the frustration with Mr. Trump succinctly: Someone has to stop him.

Steve Eisman, the investor made famous in “The Big Short” for having foreseen the 2007-8 housing market collapse, said some humility was in order: “Everybody in the stock market went to college and everyone who went to college took Econ 101 and had it drummed into their heads that trade wars are bad,” Mr. Eisman said on Saturday. He suggested that investors were ignoring the potential that the United States, thanks to its economic strength, may be the best positioned of any nation to prosper in such scenarios.