President Donald Trump’s whipsawing economic policies have left investors on edge, creating a profound sense of uncertainty in the stock market. Tariffs, mass government layoffs, funding cuts, and immigration crackdowns have seriously spooked Wall Street, which is emphatically rejecting the president’s chaotic agenda. The market that embraced Trump for most of his first term and in the lead-up to his second has turned on him.
The Dow Jones Industrial Average, nearing a record high just three weeks ago, has fallen 10%. The tech-heavy Nasdaq and the Russell 2000 index, composed of smaller businesses more exposed to economic shifts, have also seen significant declines. The stock market is losing its confidence in the Trump 2.0 policies,” said Ed Yardeni, president of Yardeni Research.
Investors have turned to traditional safe havens like government bonds and gold, with Treasury yields tumbling and spot gold prices hitting $3,000 a troy ounce for the first time in history. Traders are increasingly concerned that Trump’s policies could seriously damage the economy. Former Treasury Secretary Larry Summers noted the significance of gold surging, highlighting increased uncertainty about current economic management.
Consumer confidence has also suffered, with the University of Michigan Consumer Sentiment Index and the Conference Board’s Consumer Confidence Index both registering sharp declines. Major retailers have reported decreased consumer spending in their recent earnings reports.
Wall Street’s confidence dwindling
“This market is just blatantly sick and tired of the back and forth on trade policy,” said Art Hogan, chief market strategist at B. Riley Wealth Management. Uncertainty about tariffs is paralyzing businesses, impacting hiring and investments.
Mass layoffs of federal workers and immigration crackdowns are also concerning, with potential negative impacts on local economies and key sectors. JPMorgan economists recently raised the likelihood of a U.S. recession this year to 40%, citing a “less business-friendly” stance and a more aggressive trade war. Despite previously touting the stock market as a measure of economic health, Trump has downplayed recent declines.
However, Wall Street’s message is clear: the market struggles to cope with current policies, and consumer confidence is closely tied to market performance. Investors are losing faith and are hoping for a shift in strategy. Marko Papic, the chief strategist at BCA Research, suggests that a 15% to 20% decline in the S&P 500 could compel President Trump to reconsider his trade policies.
If financial and economic volatility persist, other checks on Trump’s policy-making may emerge, with Republican members of Congress potentially dissenting if faced with a floundering economy and stock market. As the situation develops, the actual test will be whether political pressure, driven by economic realities, forces the president to alter his trade war tactics. The stock market could be a crucial check on Trump’s power, punishing the administration for extreme policies threatening economic stability.
