This Really Is Donald Trump's Stock Market -- for Better and

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Dow Jones NewsAug 22, 1:13 PM UTC
DJ This Really Is Donald Trump's Stock Market -- for Better and Worse -- Barrons.com

By Martin Baccardax

 

President Donald Trump has exerted unprecedented influence on the U.S. economy, and global financial markets, since his return to the White House earlier this year.

 

But his efforts to dictate Federal Reserve interest rates, U.S. trade policy, tech sector activity, and CEO approval also has inserted a new and equally unprecedented concern to the financial landscape that business leaders and investors must calibrate.

 

Normally, U.S. stocks are driven by fundamentals like the economy and earnings. This year, they have shown a remarkable correlation to edicts from the key occupant in the White House. The S&P 500 slumped nearly 20% in the wake of the president's disorganized "Liberation Day" tariff unveiling in early April, only to then power nearly 30% higher when he paused and ultimately reset levies based on various trade negotiations.

 

Key planks in his signature One Big Beautiful Bill Act tax policy, as well as his full-throated support for the artificial-intelligence sector, also have supported the massive investments from megacap tech companies that are driving both stock market performance and broader economic growth.

 

But his relentless attacks on Fed Chairman Jerome Powell and his move to fire the head of the Bureau of Labor Statistics have been tied to the dollar's biggest slump in decades and have raised questions over the probity of official U.S. data collection.

 

"Much of this year's market volatility has been driven by the administration's tariff policies and efforts to rework the economy," said David Laut, chief investment officer at Abound Financial in Granite Bay, Calif. "This administration is more vocal on social media, and that fuels the headline-sensitive stock market that we have right now."

 

A quick look at the market's 10 biggest moves this year -- positive and negative -- back up Laut's claim. An analysis by Dow Jones Market Data showed that half were fueled by Trump, particularly his tariff policy and the response to it, while another three were driven by a combination of tariff sentiment and economic data. Only one was a response to an individual economic-data report -- an unexpectedly slower inflation report in April that resulted in a 3.3% gain on May 12 -- and tech-driven 2.1% rise on March 14.

 

Despite the noise, stocks have risen more than 8% for the year, which is a solid performance, but the economy is growing at only half the pace it was over the back half of 2024. Morgan Stanley analysts, led by Ariana Salvatore, suggest the divergence can be explained by the fact that policy changes on taxes and deregulation broadly outweigh the negative impact of tariffs and the administration's crackdown on immigration.

 

But Trump's influence on markets, and his penchant for unexpected intervention, remains a wild card. Commerce Secretary Howard Lutnick has said the administration is looking to convert grants from President Joe Biden' s CHIPS and Science Act into equity stakes controlled by the government. That has helped trigger a pullback in tech stocks that has dragged markets lower.

 

A trade deal with Japan included, according to administration officials, a $550 billion investment pledge that would be directed by the president himself. The president even found time to scold Coca-Cola for its use of corn syrup to sweeten its iconic soda. CEO James Quincey quickly assured his company would soon sell Coke made with cane sugar in U.S. markets.

 

"We no longer have any boundaries on what we can expect from this president in terms of interference with corporate America," Heidi Heitkamp, a former Democrat North Dakota senator, told CNBC Thursday. "And it's being done by fiat."

 

But does that mean investors need to make portfolio adjustments to account for the president's often-changing strategies?

 

Citing the president's alternate tack on tariffs in early April, Paul Stanley, chief investment officer at Granite Bay Wealth Management, thinks markets ultimately find a way through the political interference.

 

"For most investors, making any fundamental change in their investment strategy based on the short-term policy implications of one president would end up being a mistake," he added.

 

Write to Martin Baccardax at [e-mail]

 

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

 

August 22, 2025 09:13 ET (13:13 GMT)

 
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