Investors are growing increasingly concerned that US President Donald Trump is less likely to reverse his aggressive tariffs and federal spending cuts, even as US stock markets experience steep declines, the Financial Times reported.
The S&P 500 has dropped over 8% from its recent record high, while the tech-heavy Nasdaq Composite is down more than 13% from its December peak. The sharp downturn comes amid escalating fears that Trump’s hardline economic stance could slow growth and worsen global trade tensions.
“Markets are questioning the notion that the Trump administration would adapt policies in response to equity market volatility,” UBS’s chief investment office said.
Trump's diminished 'put' and market concerns
Traditionally, investors believed that severe market downturns would prompt Trump to moderate his policies—a concept often referred to as the "Trump put." However, recent signals suggest this safety net may be weaker than expected.
“In the last couple of trading days, sentiment turned in the sense that there were very clear signs that the Trump ‘put’ either didn’t exist or was set lower than where people thought it was,” said Alex Kosoglyadov of Nomura.
The White House has downplayed the market volatility, emphasising long-term business fundamentals. “The animal spirits of the stock market and what we’re actually seeing unfold from businesses are divergent,” a White House official said.
Economic forecasts deteriorate
Major financial institutions, including Goldman Sachs and Morgan Stanley, have lowered their forecasts for US economic growth, citing the potential fallout from Trump’s tariffs. Delta Air Lines also slashed its earnings outlook, citing economic uncertainty.
Despite market concerns, Treasury Secretary Scott Bessent dismissed the idea that the administration would reverse its policies if stocks continued to fall. “There’s no put,” Bessent said, adding that the economy might need a “detox period” to wean itself off reliance on government spending.
Risks of stagflation and investor caution
Some analysts warn that the combination of aggressive tariffs and spending cuts could push the US towards stagflation—an economic scenario where growth slows while inflation rises.
“Will [Trump] have the fortitude to take serious pain? That’s an open question,” said Shep Perkins, chief investment officer at Putnam Investments.
With risks mounting, Wall Street is bracing for continued volatility as investors assess whether Trump will adjust his economic strategy or press forward, regardless of market reactions.
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