This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
During President Trump’s first term in office, the stock market held special influence over him in ways that Congress, the courts, and even public opinion did not.
He appeared to take market movements as a proxy for his economic policies, at least when things were going well.
In the second month of his second term, however, bad vibes are turning into an economic souring — from anxious consumers, skittish markets, and sticky inflation — much of which stems from the uncertainty around the president’s tariffs and other policies.
So far, neither Congress nor the judiciary have presented much of a check on executive power.
But what about the influence of markets, whose prices can’t be cajoled or controlled to fall in line?
Last week we wrote about the strange feeling of being near all-time highs without the joy that usually accompanies such run-ups. Since then, the stock market has become even more flighty. And yet another survey on consumer confidence showed people believe a darker future lies ahead. Perception isn’t data though. Or rather, it can be less reliable than more fixed metrics.
But pointing to gaps between economic data and consumer feeling doesn’t tell the whole story either. Trump is actively trying to reshape political alliances, global trade, government spending, and the role of the executive. The public registering unease over tariff threats and inflation seems less like an overreaction than earnest concern.
“[If] inflation is too sticky, [Trump] may not be able to follow through on the full implementation for fear of exacerbating the problem,” said Paul Stanley, chief investment officer at Granite Bay Wealth Management.
At just over 3% off the S&P 500’s record high, the Trump team doesn’t see the president being moved by the fickle whims of daily stock trading. But a 10% correction might be a different story.
“If the market really tanks I think you would see Trump respond,” said Scott Lincicome, vice president of general economics and trade at the Cato Institute. “The biggest tariff threats would fade into the background and you would see more focus on getting some sort of tax package across the line.”
This week, Treasury Secretary Scott Bessent noted the administration had a special focus on the 10-year yield, another market and economic-based report card that will not move just because someone demands it.
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