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Investors fear that Donald Trump’s sudden stock sales will be far higher than his first term as he loses faith in financial markets to curb the president’s tariffs and spending cuts.
U.S. stocks have recently sunk more than 8% from a record high hit within three weeks, and U.S. stocks have sunk more than 8% as Trump’s tariffs sparked concerns over the world’s biggest economic trajectory.
Many investors and Wall Street banks have staked cuts to the federal government if Trump ultimately regained his most serious tariff threat and the market responded violently, but they hope that what is called Trump will throw.
“The markets are questioning the notion that the Trump administration will adapt policies in response to stock market volatility or concerns about economic growth,” UBS’s top investment firm told clients Monday evening.
“People were wondering whether tariffs would take their feet off the gas pedal,” added Alex Kosogliadov, head of Nomura’s global equity derivatives, in late February.
“Sentence has changed in the past few days in the sense that there have been very clear indications that Trump hasn’t existed or that it’s not set lower than where people thought it was,” he said.
The sense of melancholy was not confined to the stock market. Goldman Sachs and Morgan Stanley are curbing expectations for US economic growth in response to tariffs and retaliation from trading partners. Delta also warned on Monday evening that economic “uncertainty” had hit the business, urging carriers to significantly reduce their first quarter sales and revenue outlook.
The VIX index, a measure of the expected volatility of US stocks, has skyrocketed from 12 to 27, above its long-term average of 25. The tech-centric Nasdaq composite, which has surged over the past two years, has fallen by more than 13% from mid-December record.
During Trump’s first term, financial market turmoil was widely seen as an important guardrail that forced them to reverse courses on policies that were deemed detrimental to US economic growth, at least in the short term.
“Everyone thought the only way he could retreat would be if the stock market fell sharply,” said one trading executive at Wall Street Bank. “What people didn’t see was that if the stock market plummet, it would change his story.”
The White House doubled the firing of a financial market turmoil following a sudden stock sale on Monday.
“We see a strong difference between the animal spirit of the stock market and what we actually see. The latter clearly makes more sense than the former about what is prepared for the economy in the medium to long term,” a White House official said.
As US stocks fell sharply in response to tariff threats on multiple trading partners, Trump made one big U-turn and delayed most taxes in Canada and Mexico until April. However, other items, including steel and aluminum, which will take effect on Wednesday, and the rise in tariffs on China, remain intact.
The drumbeat of comments from top Trump officials has been consistent, igniting fear of stock market troubles.
Treasury Secretary Scott Bescent incited investor concerns over the weekend. He appeared to dismiss the idea that Trump would cut some of his economic policies if the stock market continued to roll.
“There’s no put,” he said. “Trump’s cooperation is that if there is good policy, the market will rise.”
Bessent also said the US economy may need a “detox period” because it does not rely on government spending.
“As we move from public spending to private spending, there will be natural adjustments,” he said. “The markets and the economy were just crazy. We were crazy about this government spending. And there’s a period of detox.”
For Trump, “time is the only constraint,” said Barry Bannister, chief equity strategist at US Bank Stifel. “One of the new administrations is when they break eggs to make omelettes, and the ambition of the (Trump) administration is a broad improvement in the economic order.”
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But the risk of growth cooling and rising inflation is known as the stag — growing as Trump pushes tariffs on America’s biggest trading partners, and we are exposed to the “Pinker movement” where stocks slow down earnings per share and prices drop.
“Does (Trump) have an indomitable spirit in serious pain? Putnam Investments Chief Investor, Shep Perkins said:
