Though President Donald Trump said in his inaugural speech in January that “America’s decline is over,” investors seeing stocks sink in recent weeks have not received much compassion from the White House.
Rather, Trump, who in November one economist called America’s “most pro-stock-market president” ever, has shocked Wall Street by prioritizing tariffs above “pro-growth” elements of his plan and asserting he is not even looking at the market turbulence.
By following a recent theme whereby the White House won’t rule out a recession, Trump’s staff has undermined investor confidence, especially among older Americans who own much of the stock market.
With both groups wondering how bad things would go before the Trump administration would entertain a détente on tariffs or rethink the magnitude of cuts to federal agencies and employment, that posture startled retail investors and left Wall Street on edge.
Jim Baird, chief investment officer at Plante Moran, said, “It’s probably caught people off guard,” if one were expecting a rerun of Trump’s first term.
Trump administration have focused more on advancing policy aims to transform U.S. trade and the economy and less on markets starting 2025.
Defined as a minimum 10% decline from a recent peak, the current stock-market correction might not be anything out of the usual. However, if indicators of notable economic slowing show or market circumstances deteriorate rapidly, Baird believes a Trump turn-about would develop. “But I don’t think there is any way to know that right now,” he continued.
As Trump’s tariff campaign shook Wall Street and consumer confidence sank, the S&P 500 index SPX in mid-March joined the Nasdaq Composite Index COMP in a decline.
With Chair Jerome Powell stating that “hard” economic data still looks solid and that inflation resulting from tariffs may be “transitory,” stocks had a brief flash of confidence earlier this week after the Federal Reserve maintained interest rates constant. On the tariff issue, the White House has also been quieter; this seems to help support markets.
Looking ahead, Wall Street anticipates a challenging year especially if apprehensive households and companies end up spending less, which might slow down the economy.
Against that background, rumors have surfaced regarding the Fed perhaps polishing its own “put,” or rescue strategy. To boost the economy and markets, the central bank has historically drastically lowered rates and employed other strategies including bond purchases.
Declaring the Fed put “alive and well” in a Wednesday note to clients, strategists at BofA Global said the central bank was more preoccupied with economic concerns than with a recent inflation increase. “Worried policymakers are good for risk assets,” the credit-strategy team of Yuri Seliger said.
Boom, infant, bust?
Moody’s Analytics estimates that half of all U.S. spending now comes from top-earning households, hence the major concern for the economy this time around would be a continuous decline in the stock market that reduces the purchasing patterns of wealthy individuals.
“It’s pretty shocking stuff,” said Leuthold Group Minneapolis chief investment officer Doug Ramsey. “That’s a secular migration that had been happening prior to COVID and this market surge in the last two and a half years, but really turbocharged.”
“There’s definitely that the stock-market rises have helped to contribute to that,” he said. Over the previous two years, the S&P 500 has climbed more than 20%.
Higher asset values can help to explain the “wealth effect,” the theory that consumers spend more when home values or equities climb. Most homeowners locked in ultralow mortgage rates during the epidemic as house values climbed, giving families a buffer and a pile of home equity to draw from should inflation climb.
Although younger persons’ percentage of homeownership has increased recently, quarterly census data shows that a considerably higher number of people 65 and older own their homes. About 80% of stocks and equity funds are controlled by those 55 years of age and beyond as well.
Tracy Chen, a portfolio manager with the global fixed-income team at Brandywine Global, stated in an interview “The equity market is important because it has the wealth effect for baby boomers.”
Trump has set April 2 as a date for possible “reciprocal tariffs,” thus volatility isn’t likely gone either, even if she believes there isn’t an imminent recession danger.
On Friday, Trump said he would be somewhat “flexible” about tariffs ahead of the deadline for next month. Dow Jones Market Data shows the S&P 500 gained 0.5% for Friday, just avoiding a fifth straight week of losses.
Looking for guarantees
Investors have become used to the stock market adding to their fortune, not subtracting from their riches as equities have mostly avoided significant pullbacks in the past two years.
The retreat in 2025, however, has startled people—including elderly persons who have been closely observing activities by Elon Musk’s so-called Department of Government Efficiency as it seeks to reduce services and staff in government agencies.
“I can’t say it’s a blip on the screen,” said Jim Keenan, New York’s founder of Keenan Private Wealth Management, on his most recent client talks. “To me, politics is dragging everything.”
According to Keenan, his customers are baby boomers who have been with him for decades. “Everybody’s nervous watching the news and getting more and more irritated,” he remarked. “Like a deer in the headlights.”
From asset appreciation, some customers have been transitioning to asset-preservation mode; he mentioned trying to go into bonds and dividend stocks.
Others have been reconsidering large outlays, like whether to delay renovating a kitchen. “I doubt on the ground people are stopping spending, but they are thinking of it.”
Dow Jones Industrial Average DJIA was 6.7% off its record close; the S&P 500 closed the week down 7.8% from its prior top in February; the Nasdaq was almost 11.9% lower from its December record. Dow Jones Market Data.
