The stock market has plunged since President Trump took office for a second term. This is a stark contrast to his first term, when he frequently touted a booming stock market. Investors are shaken by the administration’s messaging on tariffs.
What seemed like a negotiation tactic has started to take effect as policy. The uncertainty surrounding these policies and their potential effects on the economy is causing market turmoil. The worry is that consumers may be hesitant to spend and businesses may be reluctant to invest in the face of this uncertainty.
This could drive the economy into a downturn. Trump’s immigration policies and firings of federal employees are also contributing to the unease. The administration has acknowledged that its policies could result in near-term pain while emphasizing their goal of promoting long-term job growth.
Trump inherited a very different market from his first term. In 2017, stocks were primed to rise on the heels of his pro-growth agenda. As his second term began, the stock market had already reached record highs, making it harder to achieve new heights.
Trump recently suggested that the stock market might no longer be the barometer for success it once was. He told reporters, “Markets are going to go up, and they’re going to go down. But you know what?
Market turmoil under Trump’s policies
We have to rebuild our country.”
Wall Street is growing increasingly concerned that Trump’s policies could inflict serious damage on the economy. Despite Trump’s insistence that stocks are falling due to inflationary problems inherited from former President Joe Biden, the market had boomed after Trump’s November election.
Consumer confidence has plummeted. The University of Michigan’s consumer sentiment index fell to its lowest level since the height of the inflation crisis in 2022. Major retailers reported that tariffs and inflation are causing people to spend less.
JPMorgan economists recently raised their forecast for the likelihood of a US recession this year to 40%. The bank cites a “less business-friendly stance” from US policy, including a more aggressive trade war than feared. Ignoring the market, Trump has altered his stance as the markets fell.
He said, “You can’t really watch the stock market. Markets are going to go up and down.”
However, Wall Street doesn’t like being ignored – it’s sending the president a painful message. Tumbling markets can erode consumer confidence and disconcert those relying on stocks for retirement funds.
Experts believe that a significant stock market decline might force Trump to reconsider his trade war. Top earners, who support consumer spending, might change their behavior in response, potentially dampening economic growth. With a Republican-controlled Congress and a conservative majority in the Supreme Court, financial markets might be the last check on Trump’s power.
If economic volatility continues, additional checks on Trump’s policy-making could emerge, potentially making him a lame duck president in a few months’ time.
Image Credits: Photo by Joshua Mayo on Unsplash
