Stocks soared during Donald Trump’s tenure, but the party might be ending. The Federal Reserve’s moves could push markets past the breaking point.
Trump’s Bull Run: Powered by Tech and Tax Cuts
Under Trump’s first term, the Dow Jones Industrial Average jumped 57%, the S&P 500 climbed 70%, and the Nasdaq surged 142%. Early in his second term, those gains looked set to continue, with double-digit increases across the board. But recent weeks have seen the markets stumble, with the S&P 500 down about 5% from its peak by mid-March 2026.
Two big forces helped drive that rally beyond Trump’s policies: artificial intelligence and quantum computing. AI is stirring excitement as the next big tech leap, potentially adding over $15 trillion to the global economy by 2030, according to PwC analysts. Quantum computing, though still in its infancy, could deliver up to $850 billion in economic value by 2040, according to Boston Consulting Group.
On the policy front, Trump’s Tax Cuts and Jobs Act slashed the corporate tax rate from 35% to 21%, the lowest since 1939. That left companies with more cash, fueling massive stock buybacks. In 2025 alone, S&P 500 firms repurchased over $1 trillion of their shares, with $249 billion in just the third quarter. Those buybacks boost earnings per share, making stocks more attractive to investors focused on value.
The Fed’s Role: From Supporter to Threat
But the Federal Reserve has become a wildcard. It raised interest rates aggressively in 2022 and 2023 to tackle soaring inflation, then began cutting rates to keep unemployment low. The S&P 500 trades at a forward price-to-earnings ratio of about 21—higher than its long-term average in the high teens.
The tech-heavy Nasdaq is even pricier.
Investors have relied heavily on predicting how the Fed’s policymakers—the Federal Open Market Committee—will adjust rates. But uncertainty is rising. The last five FOMC meetings saw at least one dissenting vote, and some members signal opposition through “soft dissents,” where they agree publicly but express different views in their economic forecasts.
That split shakes confidence. If the Fed can’t present a united front, markets could get spooked. The FOMC’s 12 members, including Chair Jerome Powell, each hold equal sway. Yet recent meetings have revealed cracks, with some pushing for faster rate cuts and others wanting to hold steady.
New Fed Leadership Won’t Calm Markets
President Trump’s new nominee for Fed Chair entered the scene in March 2026. But the committee’s divisions run deep, and it’s unclear whether fresh leadership will unite the group or add to the confusion. Investors thrive on predictability; anything less could rattle markets further.
Prediction markets like Kalshi have gained attention for their accuracy in forecasting economic events, sometimes outperforming traditional methods. The Federal Reserve itself has studied Kalshi’s data, finding it matches or beats surveys and futures in predicting inflation, unemployment, and even the Fed’s own rate decisions. These markets tap into retail investors’ views, offering a real-time pulse on economic expectations.
Still, even the best forecasting tools can’t fully tame the uncertainty when the Fed’s internal disagreements grow. That leaves stocks vulnerable, especially those trading at lofty valuations fueled by cheap money.
Signs of a Market Turning Point
The Trump bull market has run on more than just policy—it rode the wave of tech advances and corporate buybacks. But now, the Federal Reserve’s actions threaten to pull the rug out from under it. With the S&P 500, Dow, and Nasdaq all retreating from record highs, the market’s resilience is being tested.
Interest rates act like gravity on stock prices: when rates rise, they pull valuations down. Warren Buffett put it plainly—stocks aren’t worth as much when investors can get better returns on safe bonds. The Fed’s rate hikes in recent years lifted borrowing costs, squeezing profit margins and investor enthusiasm.
And with the Fed’s future moves less clear than ever, investors face a tricky landscape. The split within the FOMC means markets can’t count on a smooth path forward. That uncertainty might prompt more selling, especially if inflation stays stubborn or economic growth slows.
What happens next could depend on whether the Fed manages to regain consensus and calm nerves. If it doesn’t, the Trump-era market gains might quickly unravel.
The Trump bull market thrived on a blend of tech innovation, tax policy, and easy money. But as the Federal Reserve’s internal friction grows and interest rates remain unpredictable, that rally could be running out of steam.
