Many of us who follow the stock markets scratch the top of our heads and think of the famous saying “When something is too good to be true, it probably is.” In Bucharest, despite the particularly worrying economic landscape, the BET stock market index has risen by more than 11% since the start of the year.
Many are rightly wondering why the stock market is doing so well. Higher corporate taxes? Higher taxes on portfolio investors? Economic slowdown? The high risk of a rating downgrade to ” junk” ? The sarcasm is justified as it is very hard to find news to support such a performance of the local stock market.


Things are just as strange in the world, as the World Bank has adjusted downward its forecast for global economic growth. Moreover, the escalation of geopolitical tensions seems to be viewed with relative detachment. Relevant in this respect is the fact that the war in the Middle East has had a minimal impact on stock markets, with oil prices showing relatively a higher sensitivity.

And in the US, the Fed’s downgrade of its economic growth forecast coupled with expectations of higher inflation would have been expected to be reflected in stock market developments. For the Fed is suggesting that stagflation risk is on the rise. And the US President’s surprises, be it trade wars or economic policies that will lead to further increases in US external debt to new record levels produce either rather modest market moves or short-lived volatility. The result is that the Dow Jones and S&P500 indices are at historic record highs.

Sarcastic (or analytical?), Wall Street brokers have put the stock markets’ indifference to President Trump’s aggressive decisions down to a new syndrome: TACO (Trump Always Chickens Out). The syndrome suggests that US stock markets are again ignoring the president’s aggressive messages to various countries, betting on his change of heart and a return to more reasonable terms.

As a recent article in the FT suggests, TACO could only partially explain the markets’ indifference. Another explanation could be the lagged reaction of the economy to trade policy changes, which is estimated at 1 year according to a study by the central bank of Denmark. In other words, investors would wait to see the first signs of the impact of these measures before taking decisions.

Finally, a third reason could be the trivialization of the crises that have rolled over us, whether geopolitical in origin or related to major changes in the US economic stance towards its major economic partners and military allies. In another FT article, Gillian Tett refers to the concept of “normalization of deviance” introduced by sociologist Diane Vaughan in her study of the 1986 Challenger disaster.

Her conclusion is that the accident was not the consequence of a single major error. Rather, it was the consequence of a process by which, in the past, minor problems or deviations were ignored as acceptable. Normalizing these deviations lowered the level of vigilance among technicians, creating the context, the organizational culture that allowed the deviation that proved fatal to the Challenger shuttle.

The risk is that the normalization of crises by investors will be the preamble to a shock produced by a crisis that cannot be normalized.

In the case of Romania, the apparent decoupling of the stock market from the economy could have other explanations. Let us note first of all that, in fact, the stock market growth in 2025 is almost entirely due to post-presidential election developments, until then the index mover rather in corridor. In the specialized literature, this has an established name: “relief rally”. That is to say, a rise in the markets, primarily of an emotional nature, at a time when investors are breathing a sigh of relief after having had major fears about economic or (geo)political developments. Others equate it with the “pendulum effect” when, after a period of excessive pessimism, market sentiment swings to the other extreme, reflecting excessive optimism.

In terms of the relatively low volatility of the local stock market, pension funds, with their increasing size become more and more market stabilizers for which stock market dips represent buying opportunities. At the same time, given the shallowness of the market, any selling decisions will be very difficult to implement, especially for Pillar 2 pension funds. For this reason, portfolio management is more likely to be done by possibly postponing the investment of the contributions received each month and less through active sales. In addition, the much more modest presence of foreign investors compared to other European exchanges means that changes in international sentiment have a limited impact on the local stock market.

Under these conditions, I see few reasons why the BET index would continue to rise, but any adjustment will be rather gradual reflecting the new economic conditions.

In conclusion, let’s remember and be prepared: “When something is too good to be true, it probably is.”

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