‘uncertainty Is Rising’: Stock Market Turbulence Could Spell Trouble For Trump

Donald Trump’s election helped turbocharge an already surging bull market in the U.S., sending stocks and cryptocurrencies to record highs.

Now, some on Wall Street are beginning to sound the alarm that the fast times can’t last.

JPMorgan Chase CEO Jamie Dimon and others have warned that investors are plowing cash into stocks with inflated prices. Hedge fund giant Elliott Management said the blistering rise in crypto over the last year, with bitcoin up 89 percent, is the stuff of bubbles. So-called memestocks — companies like GameStop, whose shares tend to be driven by investor hype — have returned. And on top of that, economists say Trump’s plans for tariffs and an immigration crackdown — along with the dizzying pace of his policy moves — could roil the markets by stoking inflation and fueling uncertainty.

“For good or bad, depending on your politics, we're back to the chaos presidency," said Jim Chanos, a hedge fund manager who famously bet against Enron and other failing companies. "Whatever you might think about the Biden administration, if you were a market participant, you generally didn't need to check your Twitter feed the first thing in the morning when you woke up just to see what was said. But we're back to that, and with that, comes probably more volatility.”

It isn’t just Trump, of course. The markets are coming off back-to-back banner years fed by a mix of pandemic stimulus money, wild optimism about artificial intelligence, and a supersized interest rate cut by the Federal Reserve last year. But the brewing anxiety over an overvalued market now portends potential problems for the White House.

Trump — who is fond of touting market highs as indications of his success as America’s chief executive — is fixated on lifting up businesses and consumers. A stock market slide could undercut his reputation as a pro-growth president and scramble his administration’s economic plans if it’s forced to deal with the fallout.

“Everyone who puts on the nightly news or even watches Twitter knows what the stock market does every day,” said Ed Hill, a veteran financial industry lobbyist. “It’s become a preferred measure of the economy, even though we all know it doesn’t really reflect the economy. People are going to be very sensitive. This administration particularly is going to be very sensitive to markets.”

To be sure, naysayers are nothing new on Wall Street or in crypto, and Trump’s allies argue that the president’s plans will boost the markets over time.

Hal Lambert, a Republican donor and founder of investment management firm Point Bridge Capital, said the combination of Elon Musk’s cost-cutting campaign, the expected extension of the 2017 tax cuts, and lower oil prices represent major economic windfalls to come. And in the meantime, he said, U.S. stock investors aren’t going anywhere.

“People aren’t going to sit around and hold money markets, and they’re not going to sit around and buy three [or] four percent Treasuries,” Lambert said. “They’re going to keep investing in the equity markets.”

Indeed, investors aren’t slowing down much. The benchmark index for U.S. stocks, the S&P 500, closed at a new all-time high Wednesday. And crypto has continued to surge, with bitcoin — the world’s most valuable crypto token — remaining at sky-high valuations after breaking through $100,000 earlier this year.

Most Wall Street banks and research shops still believe investors are in for a generally positive 2025, as do everyday buyers themselves. More than half of consumers are expecting stocks to increase over the course of 2025, according to the Conference Board.

But the bullishness is running into economic headwinds — adding to the volatility in the markets. (The S&P 500 followed its record highs last week with a two-day slide.) Inflation jumped more than expected in January, effectively guaranteeing that the Fed is unlikely to cut interest rates any time soon — much to the dismay of stock and crypto traders. And a lack of clarity about Trump's plans is bound to weigh on the economy, J.P. Morgan Asset Management Chief Global Strategist David Kelly warned.

“Uncertainty is rising, but individual investors are completely certain that they know what the outcome is going to be,” said Rich Bernstein, chief executive officer of Richard Bernstein Advisors, which oversees more than $16 billion in assets. “That’s crazy.”

White House spokesperson Kush Desai pinned the January inflation report on the Biden administration’s “runaway spending.” The Trump administration, Desai said in a statement, is “aligned on cutting bloat to make our government more efficient while unleashing American energy and slashing burdensome regulations to restore American prosperity."

In the markets, the concern revolves around investors' concentration in a handful of high-flying technology stocks — the so-called Magnificent Seven, which includes Nvidia, Meta and Tesla. While those stocks have outperformed for years — largely on investors’ beliefs that they will become the artificial intelligence giants of the future — their trajectories look more unclear now.

Last month’s arrival of Chinese startup DeepSeek’s cheaply made AI was quickly followed by a sudden but brief selloff in those and other major tech stocks, as investors reckoned with the possibility that AI dominance could be far less expensive than first thought. And it’s not likely to be the last. The largest U.S. stocks are in for more frequent and wilder moves in 2025, according to Bank of America strategists. They noted that stock “fragility” — a measure of instability — is on pace for a 30-year high in 2025.

Crypto, meanwhile, has roared higher since Election Day. But the already speculative market’s explosion makes it that much more vulnerable to selling off, given the lack of fundamentals to justify certain tokens’ prices, J.P. Morgan’s Kelly said. And Elliott Management, the hedge fund run by billionaire Paul Singer, recently warned investors that the White House’s friendly plans toward crypto are quickly inflating a bubble in the market, according to the Financial Times.

“The crypto industry has got many friends in Congress and the administration. And that may help it for a bit, but in the end, it’s not worth anything,” Kelly said. “It is priced purely on the greater fool theory and admittedly, there’s no shortage of great fools in the world.”

For Bernstein, the alarm bells mean that the Trump administration needs to be careful as it rolls out its plans. Otherwise, it could spook investors and ignite a quick downturn in the markets.

“It’s not like we’re in an environment where people are bearish and the slightest positive thing will cause a bull market. This is the exact opposite,” he said. “People are really bulled up, and so they’re going to have to tread much more lightly than they think they are, and they’re going to have to thread a very small needle.”