As President-elect Donald Trump prepares to retake the White House, the financial markets are sending a mixed message. While the S&P 500 continues its bullish streak, Wall Street’s silence on Trump’s more controversial policies raises an important question: Can the markets act as a check on presidential power, or will they enable an economic revolution?
A Tale of Two Messages
Trump has historically paid close attention to the stock market, frequently touting its performance as a reflection of his economic success. During his first term, markets soared, and he wasted no opportunity to claim credit. Now, after his 2024 election win, investors seem optimistic about a continuation of the pro-business policies that defined his earlier presidency.
Last week, Trump made a calculated play to calm the markets, appointing hedge fund billionaire Scott Bessent as Treasury secretary. Known for his pragmatic and nonideological approach to finance, Bessent has reassured Wall Street that fiscal expertise will guide the administration. Stocks and bonds rallied on the announcement, reinforcing investor confidence.
Yet just hours after the markets showed their approval, Trump declared plans to impose hefty tariffs: 25 percent on Canada and Mexico, and 10 percent on China. These measures, consistent with his campaign promises, threaten to disrupt global trade, raise consumer prices, and slow economic growth—risks most economists agree could weigh heavily on the market.
Markets’ Quiet Endorsement
Despite the tariff announcement, markets continued their upward trajectory, seemingly unperturbed by the potential consequences of Trump’s policies. Analysts note that financial markets have become adept at discounting Trump’s inflammatory rhetoric, treating his statements as mere bargaining tactics.
Moreover, the market’s focus remains on corporate profits and economic growth. If Trump’s policies—tax cuts, deregulation, and pro-business initiatives—continue to boost the bottom line, investors appear willing to overlook the potential long-term downsides of protectionism and other disruptive measures.
A Bull Market, but at What Cost?
Bessent’s appointment has drawn comparisons to Steven Mnuchin, the first Trump administration’s Treasury secretary. Mnuchin, despite controversy elsewhere in the executive branch, was well-regarded in financial circles for his market-friendly approach. Bessent seems poised to follow a similar path, assuring investors of economic stability while quietly navigating the fallout of Trump’s bolder moves.
Economist Kevin Hassett, Trump’s pick to lead the National Economic Council, reinforces this narrative. A seasoned economic advisor, Hassett has expressed skepticism about tariffs’ economic benefits and supports immigration for its positive impact on labor markets. However, his expertise may be overshadowed by Trump’s populist agenda, which includes curbing immigration and increasing trade barriers.
The Markets as a Check
Historically, financial markets have acted as a moderating force on presidential power, particularly when economic policies threaten corporate profits or investor returns. If Trump’s tariffs and other protectionist measures disrupt business growth, the markets could send a clear signal, prompting a course correction.
Yet this assumes that markets will react to long-term risks—a premise that recent behavior challenges. Investors’ continued optimism despite Trump’s tariff plans suggests a focus on short-term gains over structural concerns. Wall Street’s silent endorsement of these policies may inadvertently embolden Trump to push his agenda further, reshaping the U.S. economy with little opposition.
The Stakes
Trump’s economic revolution hinges on a delicate balance: delivering on his promises to voters while maintaining investor confidence. The initial response from Wall Street suggests he may have room to maneuver, but this support is not guaranteed. If his policies ultimately hinder corporate profitability or destabilize the broader economy, even the most forgiving markets may sound the alarm.
For now, Trump’s plans for tariffs, deregulation, and tax cuts set the stage for a high-stakes experiment in economic governance. Whether Wall Street will act as a counterweight or a silent accomplice remains to be seen.