The stock market has been relatively muted since President Trump took office for his second term in January. The S&P 500 is now lower than it was on Inauguration Day, and other indexes more closely tied to the economy have also fallen. During his first term, Trump regularly cited soaring share prices as a measure of his success.
However, he has been less vocal about stocks lately, even after the S&P 500 hit a record high on Feb. 19. The index has since fallen almost every day, marking its second consecutive week of losses for the first time since October.
Other bullish reflections of Trump’s election have also faded. Bitcoin has tumbled roughly 20 percent over the past month. Consumer sentiment is souring, and investors are growing weary over the numerous policy proposals coming out of Washington.
“The tariff rhetoric has become daily and extreme, sentiment is awful, and trading is on edge,” said Andrew Brenner, head of international fixed income at National Alliance Securities. Today’s market is fundamentally different than it was during Trump’s first term. Stock and bond markets had previously grappled with the fallout of a domestic energy crisis.
Interest rates were much lower as the Federal Reserve tried to revive tepid growth.
Shifting investor sentiment under Trump
As Trump unleashed tax cuts and promoted a pro-growth agenda, stocks were primed to rise.
But now, the stock market had already surged, with valuations at historic highs. The S&P 500 had risen more than 20 percent for two consecutive years, making it harder to reach new heights. The huge tech companies driving the recent rally are beginning to sputter.
The market’s composition has also shifted. These tech stocks, known as the Magnificent Seven, now account for roughly a third of the entire S&P 500 index by market value. As their share prices fall, they become an anchor weighing the market down.
Investors are notably nervous. According to Bank of America’s latest survey, many fund managers are wary of the market’s uncertain direction, especially given the potential for tariffs to spark a trade war and crimp economic growth. Almost 90 percent of respondents said that stocks are overvalued.
The CBOE Skew Index, which measures how much investors are preparing for a sell-off, reached its highest level ever on Feb. 18, the day before the S&P 500 hit its record high. It suggests that investors are nervous that the market could soon tumble.
And that could be why the stock market is no longer the barometer of success that Trump once claimed it was.
