Is the Trump Slump over?

Tariffs would destroy supply chains and drive up inflation. Elon Musk’s savage cuts would bring the government machine grinding to a halt. And chaotic policy making would drive investors out of the United States. As the Dow, the S&P 500 and the Nasdaq all fell sharply over the last month, there were plenty of factors driving the “Trump Slump,” as it became known on Wall Street. But hold on. Sure, equities have corrected. But right now it looks as if the rout is already over, and the markets have steadied again. 

Last week, US stocks finished in positive territory for the first time in a month, chalking up modest gains over five trading days. On Monday, they carried on climbing, with the Dow up by more than 500 points, and the Nasdaq by more than 300. It would be easy to dismiss that as a “dead cat bounce”, that is: a temporary rally before the bear market starts to gather momentum. Perhaps it is. And yet, it may also signal that the worst is already over. 

Why? First, the tariffs are not as bad as first feared. Sure, it remains to be seen what is imposed on Europe, and a few other countries on April 2, described by the President as “Liberation Day.” But there are signs they may be milder than expected, while some countries may negotiate them away completely. The UK for example is reported to be ready to abandon its “tech tax” to secure an exemption, and France may come up with something to stop levies being imposed on champagne and claret (a Pacific island might do the trick). Next, despite some of the hysterical claims as Musk’s DOGE started slashing state spending, the government still functions, at last in its typically ramshackle way. The lay-offs have not crashed any systems — perhaps all those people were not so crucial after all — and nor has demand been drained out of the economy. Finally, while Musk may never get close to the $1 trillion of savings he is hoping for, if can manage even a fraction of that it will pave the way for tax cuts. Combine that with deregulation, and it will give companies a boost, and the market is already starting to anticipate that. 

In reality, there was always an element of wishful thinking behind the “Trump Slump” narrative. The President’s ideological opponents, understandably, want him to fail, and it is especially pleasing to see him failing at the one standard by which he frequently measures himself; the performance of the stock market. There has been a correction, and some money has moved into Europe, and even China. And yet neither of those economies are in great shape either. No one can ever really predict where the stock market will go next. But there are growing signs the slump has already passed — and Wall Street can start its recovery.