Wall Street loses patience with Trump

One of Donald Trump’s first reactions to Monday’s Wall Street meltdown was to announce that he would buy a new Tesla. The automaker’s shares were among the hardest hit of the day, having already lost more than half their value since their December highs due to poor sales, something the U.S. president attributes to a left-wing boycott of Elon Musk. The electric vehicle manufacturer’s fall is the most extreme indicator of what’s happening in the U.S. markets: they have been in recalculation mode for three weeks, since the record highs of February 19. “What if Trump’s term in office isn’t what we expected?” the money world seems to be starting to ask itself.

What they expected was tax cuts for large corporations, deregulation, and a growth boom. The most optimistic forecasts even considered the possibility of a peace agreement in Ukraine that would sweep away one of the great geopolitical uncertainties. Instead of that virtuous spiral, the Republican’s first month and a half in the Oval Office has been marked by instability. An erratic tariff war that has punished the U.S. more than its supposed victims. Massive layoffs in the administration. A public confrontation with Volodymyr Zelenskiy that culminated in the temporary suspension of military aid to Ukraine—reinstated yesterday—and has become the final push for a European rearmament that will put its industry back to full capacity.

The growing feeling is that the U.S. economy is losing steam: a report by the Swiss bank UBS published this Tuesday raises the possibility of stagflation, its worst-case scenario, from 20% to 30%. Their central thesis, in any case, isn’t good news either: there is a 50% chance that growth will slow down compared to last year.

Trump’s remarks have only added fuel to the fire. In an interview on Fox News on Sunday, he said the economy was going through a “period of transition.” And he didn’t rule out a recession. “I hate to predict things like that. [...] There is a period of transition because what we’re doing is very big.” Olivier Blanchard, a former chief economist at the International Monetary Fund (IMF), dismisses the possibility that the pain prescribed by Trump now will translate into future benefits. “Sometimes the argument makes sense: fiscal consolidation can return debt to a sustainable path despite initially leading to a recession. Stricter regulation can slow activity now, but make the system more resilient later. What we’re seeing now has nothing to do with this. The reason for the apparent slowdown is extreme political uncertainty, which is leading consumers to worry, businesses to wait to invest, and demand to fall. In exchange for nothing particularly good in the future. Just a pure loss.”

The bottom line is that almost everything is getting worse. And the most visible consequence is that money is leaving the U.S. markets. The S&P 500, which represents the country’s largest companies, is at six-month lows, as is the Nasdaq technology index, which experienced its worst session since 2022 at the start of the week, with losses of more than 4%.

Wall Street has built its boom of the last year and a half on seven major technology companies whose valuations have reached levels as stratospheric as they are difficult to maintain. Apple still has a market capitalization of over three trillion dollars. And Microsoft, Nvidia, Alphabet, and Amazon are trading at over two trillion dollars. But the incentives to continue feeding what for some is a new AI-fueled tech bubble, and for others the beginning of a revolution, have been exponentially reduced.

Investors are jumping to other markets. Citigroup and HSBC have downgraded their ratings on U.S. stocks from buy to neutral, and have also upgraded their recommendations on China and Europe to buy, respectively. China and Europe are experiencing a booming 2025—despite the accumulated punishment on Monday and Tuesday, the German Dax and the Ibex 35 are up more than 10%. Meanwhile, in the U.S., more defensive sectors, such as consumer goods companies, pharmaceutical companies, and real estate investment trusts (REIT) are being spared, with less volatility and higher dividends than technology companies. They are viewed as more stable and predictable, precisely what Washington lacks.

Trump doesn’t seem to take any notice. On Sunday, he asserted that his mission is to build a strong country and not to look at what the stock market is doing. And on Tuesday, far from easing up, he upped the ante by threatening to double tariffs on Canadian steel and aluminum, causing further declines in the stock markets, only to reverse course just a few hours later.

This negotiation method based on commercial threats and coercion is generating pernicious uncertainty for the markets. And the United States is a nation of small investors. Data from a recent Gallup poll indicates that 62% of adults own stocks—that's 162 million people—most of them through funds, many of them pension funds. Nvidia Day, which follows the chip company's earnings release, has become a major event in the economic media, including the countdown clock. This cult of money, in short, which has allowed millionaires like Trump to rise to power twice, may now be the president's worst enemy: when they check their bank and brokerage accounts every day, the amounts seen by millions of ordinary citizens, all of them voters, continue to dwindle.

A brake on their excesses?

While Trump appears to be going it alone, the White House has tried to calm things down. “We’re seeing a sharp divergence between the animal spirits in the stock market and what we’re actually seeing unfold in companies and business leaders,” a spokesperson told reporters Monday afternoon. Animal spirits refer to irrational movements dictated by emotions, rather than economic fundamentals, a way of shifting blame.

Wall Street’s loss of patience with Trump, whom it first considered an ally but now views as an annoying obstacle to what seemed like an unstoppable positive momentum, could put pressure on him to back down on the intensity of his trade war. This is the hope of Clément Inbona, a fund manager at La Financière de l’Échiquier, although he is not entirely confident. “In light of his first term, it seems that, for Trump, achieving his Make America Great Again mantra also depends on resilient stock markets. Let’s hope this thermometer continues to act as a brake on some of his excesses, since, without it, the next four years threaten to be long for investors exposed to U.S. assets,” he said.

Whether it’s wishful thinking or reality, the speed with which the market’s expectations for Trump are fading is surprising. And it’s not just the stock market. Crypto believers, one of his sources of votes and donations during the campaign, have seen the price of Bitcoin plummet by more than 20% since his inauguration, although it still holds above pre-election levels. If these ups and downs matter to Trump—which is far from clear—the best news for him is that he still has three years and 10 months to reverse the trend. In the case of Tesla, battered by Chinese competition and a growing rejection of Musk, it will require more than just asking Republican voters on social media to go buy more Teslas.

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