The US stock market has had bumpy rides since the election of US President Donald Trump in November.
After winning record highs in the aftermath of Trump’s victory, US stocks have dumped trillions of dollars amid his dizzying announcements about mid-flying round trips and rising fears about the recession on tariffs.
Trump defeated the turbulence as a temporary “transition” on the path to a stronger economy, but supporters and critics of the US president speculated without evidence that he could be intentionally trying to crash the stock market.
What will happen to the US stock market?
Trump’s false economic policies have created uncertainty. It’s something investors hate.
The benchmark S&P 500, which tracks the performance of the largest 500 companies in the United States, lost nearly $5 trillion worth of value since its peak on February 19th.
On March 10th, the high-tech Nasdaq fell by 4%. This is the worst day drop since September 2022.
Whether Trump is playing the long game as he claims, Tara Sinclair, director of George Washington University Center for Economic Research, told Al Jazeera last month that he “supports both in terms of both the amount of uncertainty and in many aspects.”
The economic policy uncertainty index generated by the Federal Reserve Bank of St. Louis based on news reports of economic policy-related issues reached its highest level from the height of the 2020 Covid-19 pandemic.
The January Global Economic Policy Uncertainty Index reached a record high, separate from May 2020.
Why is there anyone who claims that Trump wants to crash the stock market?
There are several unfounded theories as to why Trump wants to clash with the stock market, the main one being that he is trying to make the US $36 trillion citizen debt easier by lowering interest rates.
Since taking office, Trump has raised concerns about the size of his debt and called on the Federal Reserve to lower interest rates.
In a recent interview with Fox News, he argued that “people can’t borrow money, so no one gets rich when interest rates go up.”
With a gross domestic product (GDP) ratio of about 120%, federal debt is approaching its highest level since the end of World War II.
It also costs money to pay back. Last year, the US government spent more than $1 trillion on interest payments alone.
Some Trump supporters argue that he is intentionally trying to induce economic distress to enforce the Federal Reserve.
“Trump is setting a stock market crash. Thomas Clarrow, a crypto influencer and investor with over 500,000 YouTube followers, said last week on X.
“Trump doesn’t want this to be done at the current 10-year yield. This is why he’s lowering the stock market and lowering the bond prices while lowering the stock market,” Kralow said, adding that this will create “short-term pain, long-term profits.”
The Federal Reserve makes decisions independent of the White House and the US Congress, but usually reduces borrowing costs during difficult economic conditions to stimulate growth.
When interest rates drop, the government reduces the cost of interest paid on outstanding debts by paying lower yields on US Treasury bonds (essentially the type of loan to the government).
If bond yields drop, the US government could pay a significant amount of interest payments on debts refinancing, estimated by Axel Funhoff, a professor at the Antwerp School of Management in Belgium, which is expected to be around $9 trillion in 2025.
“For the majority of the decade, the US has historically benefited from low interest rates. These low fees allowed the government to lend its debt to about 2.7%, about 2.7%,” Funhoff said in a January LinkedIn post.
Interest rates are much higher today compared to the era of cheap borrowing. Yields on 10-year Treasury and 5-year Treasury debt were 4.3% and 4%, respectively, on Friday.
Why are Trump critics saying they want to buy dip?
Another theory circulating among Trump’s critics suggests that he deliberately tanks the stock market to reward himself and his supporters, including conservative Wall Street investors and Silicon Valley CEOs who support Maga.
Supporters of this theory argue that Trump will cause a market fall, allowing him and his allies to “buy dip.”
“(Trump) is intentionally manipulating the stock market… The fear of tariffs, the market said his rich companions buy dip and then remove the tariffs, the stock market will recede and the rich friends will become richer… he needs to investigate.”
So, does Trump actually want to crash the stock market?
The Trump administration has reduced disruption in the market, but has never shown that it actually hopes the stock price will fall.
In fact, Trump has often boasted about his watch stock performance in the past when the market was bullish.
Kathleen Brooks, founder of market analysis firm Minerva Analysis, said he doesn’t believe Trump is intentionally trying to lower the market.
“The US economy peaked in November and since then, US economic data has been low and surprisingly on the negative side. This means that the bond market had to keep up,” Brooks told Al Jazeera, adding that other assets like Bitcoin have also fallen from the peak.
“It’s not uncommon for the market to move in this unison. This undermines the view that movement in the Treasury market is a conspiracy theory. Instead, there are good fundamental reasons for decline,” she said.
Some market analysts also suggest that the market has been overvalued and has been postponed for a long time. This is Wall Street’s language, which has dropped by more than 10% since its peak.
Legendary investor Warren Buffett has been closely monitored for his decades-long record above the S&P 500, dumping at least $134 billion in stock in 2024 with sales widely interpreted as a signal that the market is too hot.