The stock market, a barometer often touted by Donald Trump as a measure of America's economic strength, is facing turbulent times. Since November 25, the Dow has fallen nearly 10%, raising concerns over the impact of Trump's economic policies. In recent weeks, the tech-heavy Nasdaq entered a correction phase, and the Russell 2000 has struggled to regain its post-election gains. As these developments unfold, mainstream economists and traders worry that Trump's policies might be more damaging than anticipated.
During his first term, Trump frequently highlighted market records as indicators of economic prowess. However, the current landscape paints a different picture. The Fear and Greed Index by CNN has plummeted into "Extreme Fear," reflecting growing anxiety among investors. In response, Trump has modified his stance on the economy. He acknowledged that tariffs could cause a "disturbance" and hinted at the possibility of a recession without ruling it out.
“The stock market is very — all of it, you know, all of it together, it’s very important,” said Donald Trump.
Recent earnings reports from major retailers and airlines such as Target, Walmart, Delta Air Lines, Dick's Sporting Goods, Dollar General, and Kohl's have indicated that tariffs and inflation are leading consumers to spend less. Such sentiments echo through the financial sector, where traders are increasingly concerned about the potential economic damage Trump's policies may inflict.
“This market is just blatantly sick and tired of the back and forth on trade policy,” commented Art Hogan.
“It feels as though the administration continues to move the goal posts. With that much uncertainty, it’s impossible for investors to have any confidence,” Hogan added.
JPMorgan economists have further fueled these concerns by stating that the U.S. economy now faces a 40% chance of slipping into a recession this year. As treasury yields continue to tumble, such predictions underscore the uncertainty clouding Wall Street.
Trump's response has been mixed. While he acknowledges potential short-term pain from his economic strategy, he contends that some market fluctuations are due to previous administrations' failures. Despite these reassurances, investors remain wary.
“I think a lot of the stock market going down was because of the really bad four years that we had, when you look at inflation and all of the other problems, I mean wars and inflation and so many other problems,” Trump remarked.
The Dow is inching closer to correction territory, raising additional alarms about potential economic setbacks. Mainstream economists argue that Trump may be downplaying the potential harm his policies could cause. Ed Yardeni, a seasoned market analyst, expressed concerns over the diminishing confidence in Trump's economic vision.
“Obviously the stock market can have a significant negative wealth effect if it continues to take a dive,” said Yardeni.
“The stock market is losing its confidence in the Trump 2.0 policies,” Yardeni continued.