Does Trump’s Stock Market Influence Wane?
The Uncertain Impact of Trump on the Market
President Donald Trump has long been known for his ability to influence investor sentiment. However, recent events have sparked questions about whether he is still able to maintain that control over the financial markets.
On Friday, U.S. stocks experienced a significant downturn, with the S&P 500 recording its fifth consecutive week in negative territory. This marks the first time since May 2022 that the index has fallen for five straight weeks, according to FactSet data. The decline has raised concerns among investors who previously believed that Trump’s efforts to de-escalate tensions with Iran would prevent even greater losses.
Steve Sosnick, chief strategist at Interactive Brokers, noted that investors had relied on the belief that Trump was working to resolve the conflict. However, as the situation in the Middle East continues without a clear resolution, some are beginning to worry that the conflict may not end soon.
Carol Schleif, chief market strategist at BMO Wealth Management, described the psychological impact of the ongoing conflict. “Markets are grappling with the fact that they expected this to be over on short order,” she said in a phone interview.
Recent developments have also led some to question whether Trump’s ability to reassure investors by delivering messages they want to hear is diminishing. The markets have been volatile this week due to the evolving situation in the Iran conflict, with investors sometimes encouraged by progress toward ending hostilities but still concerned about the potential for oil and gas shipments to be blocked through the Strait of Hormuz.
Barclays analysts highlighted the growing concern about the effectiveness of what is known as the “Trump put.” This term refers to a president’s or, historically, a Fed chair’s ability to stimulate a recovery by signaling policy changes. The analysts warned that constant flip-flopping and headline fatigue could undermine this effect.
“Investors no longer seem to take his statements at face value — if anything, they’re beginning to trade against them, waiting for tangible proof before reacting,” said Fawad Razaqzada, a market analyst at StoneX.
The White House responded to these concerns by emphasizing Trump’s role in driving market confidence. A spokesperson, Kush Desai, stated that “the President continues to be a powerful force driving the market’s confidence in the United States as the most dynamic, pro-business economy in the world.” He added that trillions in investments are flowing into America, and foreign holdings of dollar-denominated assets are at record highs due to Trump’s policies.
Oil prices remained high as the conflict in the Middle East continued, with West Texas Intermediate crude trading above $101 a barrel. Barclays analysts noted that the prolonged conflict could lead to more severe stagflationary shocks, as Iran does not appear eager to comply, Israel intensifies its strikes, and the U.S. sends more troops to the region.
The market’s response to Trump’s actions has been mixed. His announcement of an extension to the ultimatum to Iran came after the S&P 500 recorded its biggest daily drop since the conflict began. Barclays analysts described the panic in oil, rates, and equities as palpable.
On Friday, the S&P 500 closed sharply lower by 1.7%, while the Dow Jones Industrial Average fell 1.7% and entered correction territory. The Nasdaq Composite dropped more than 2%, following its entry into a correction on Thursday. The S&P 500’s March decline deepened to 7.4%.
The Cboe Volatility Index, often referred to as the market’s fear gauge, jumped above 31 on Friday, significantly higher than its long-term average of around 20.
Market participants are looking for a framework to stabilize the situation in the Middle East, particularly the reopening of the Strait of Hormuz for crucial tanker traffic. According to BMO’s Schleif, “The market wants to move beyond this.”
Joseph Adinolfi contributed.
