Trump's Presidency: A Rollercoaster for US Stocks Amid Tariff Turmoil

Donald Trump's presidency has ushered in a period of significant volatility and mixed performance for the US stock market, largely influenced by his tariff policies. While initial market reactions to his election and a temporary tariff pause saw surges, persistent trade tensions and the threat of recession have led to considerable investor uncertainty and market downturns.

Trump's Impact on US Stock Market Performance

• Initial Rally (November 2024 - January 2025): Following Trump's 2024 election victory, all three major US indexes (Dow Industrials, S&P 500, Nasdaq Composite) hit record highs. This surge was driven by investor expectations of lower taxes, deregulation, and a pro-business stance. "Trump trades" such as financials, small-cap companies, and certain individual stocks like Tesla, saw significant gains. The CBOE Volatility Index (VIX) also dropped, indicating reduced market fear.
• Inauguration Day Trends: Historically, US stock markets have shown mixed performance on presidential inauguration days. While the S&P 500 has seen an average decline of 0.27% since 1949 on inauguration days, the last three inaugurations, including Trump's first in 2017, resulted in market gains.

The Volatile Role of Tariff Policies

Trump's tariff policies have been a primary driver of market fluctuations:

• Early 2025 Tariff Announcements: Trump's re-election brought immediate concerns about increased tariffs, particularly on China, Canada, and Mexico. Goldman Sachs strategists estimated a 70% probability of 20% tariffs on China and a lower probability for 25% tariffs on Canada and Mexico. This uncertainty led to a sell-off in the Mexican peso and Canadian dollar.
• March 2025 Recession Fears: In March 2025, Trump's comments about a potential recession resulting from his tariffs significantly impacted market confidence. The S&P 500 experienced its largest daily percentage decline since December, and the Nasdaq saw its steepest percentage loss since September 2022. Investors sought safer assets, leading to a drop in US bond yields and a decline in oil prices.
• April 2025 Tariff Pause and Market Relief: A temporary 90-day pause on tariffs announced by Trump in April 2025 brought immediate relief to the market. The S&P 500 recorded its largest one-day percentage gain since 2008, and the Nasdaq saw its biggest one-day gain since 2001. However, analysts noted that uncertainty about the long-term tariff plan persisted, with potential volatility ahead.

Key Takeaways

• Trump's presidency has been characterized by market optimism tied to deregulation and tax cuts, contrasted with significant uncertainty and downturns due to aggressive tariff policies.
• The market's reaction to tariff announcements has been swift and often dramatic, with both sharp declines on tariff threats and significant rallies on pauses or perceived de-escalations.
• The long-term impact of Trump's trade policies on the US economy and stock market remains a key concern for investors, with potential for continued volatility.

Sources

• US stocks surge, dollar gains in dramatic relief rally as Trump pauses tariffs, Reuters.
• Trump's return to the White House: Market winners and losers, Reuters.
• Stocks sink with bond yields as Trump fuels recession fears, Reuters.
• US stock performance on dates of presidential inaugurations, Reuters.
• Stocks surge to record highs as Trump returns to presidency, Reuters.