Trump's Policies Threaten to Upend Stock Market Growth

President Donald Trump has expressed confidence in the stock market's future performance, predicting that it will 'go through the roof.' However, his own policies may be a hindrance to this growth. During his first non-consecutive term, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500(SNPINDEX: ^GSPC), and Nasdaq Composite(NASDAQINDEX: ^IXIC) skyrocketed by 57%, 70%, and 142% respectively.

The favorable corporate tax policy and the unveiling of Trump Accounts, which provide tax-advantaged savings for U.S. children born between January 1, 2025, and December 31, 2028, have been catalysts for the stock market's growth. Trump Accounts may qualify for a $1,000 initial government contribution.

However, two of Trump's policies, his tariff and trade policy and the Iran war, threaten to upend the stock market. The tariffs imposed by the Trump administration on over 80 countries have driven manufacturing costs higher, contributing to above-average inflation. The Iran war has halted the flow of petroleum liquids through the Strait of Hormuz, leading to a rapid rise in fuel prices.

The Federal Reserve's preferred measure of inflation (Core PCE) moved up to 3.4% in May, the highest level since October 2023. This persistently above-average inflation could force Fed Chair Kevin Warsh and the Federal Open Market Committee (FOMC) into action. A strong argument can be made that President Trump's current policies are more likely to slow down the stock market rather than boost it.