Stock market under the Trump administration

U.S. equity markets remain volatile, but on a generally upward trend since early April. Amid a flurry of news out of Washington, investors refocused on key fundamentals, including generally favorable economic numbers and healthy corporate earnings. As a result, by the end of June 2025, the S&P 500 topped its all-time high and generated a total return of more than 6% year-to-date. ¹

“Investors are navigating through an abundance of policy changes including tariffs, tax reform, deficit spending, the debt ceiling, border policy, and geopolitical tensions,” says Terry Sandven, chief equity strategist at U.S. Bank Asset Management Group. “Periods of change like this are often associated with investor uncertainty, angst and volatility.” Yet Sandven says investors have proven resilient despite the frequent news flow generated by President Donald Trump and his administration.

The benchmark S&P 500 began the year reaching new highs, then reversed course and nearly tipped into a bear market (a decline of 20% or more), before topping its previous highs. ¹

“What’s changed in the last couple of months is strength among fundamentals,” says Sandven. “Inflation, interest rates and corporate earnings are all directionally consistent with higher equity prices.”

Tariffs add to future uncertainty

One significant policy variable centers on new tariffs imposed by the Trump administration. During the market’s decline, President Donald Trump laid out plans for substantial new tariffs affecting nearly all trading partners. Since then, the administration has pulled back or paused many of those tariffs, although some higher tariffs remain in place and approaching deadlines could result in stricter tariffs.

“We’re in a phase now where prominent issues like tariffs are part of broader policy conversation, such as tax policy now under consideration by Congress,” says Tom Hainlin, national investment strategist with U.S. Bank Asset Management Group. “Businesses are looking for more clarity on what tariffs and tax policy will look like as they try to make plans going forward.”

The full impact of tariffs remains unclear, but capital markets appear to have adjusted to the uncertainty. “The markets have acted rationally in trying to price tariffs’ impact on corporate earnings growth,” says Rob Haworth, senior investment strategy director with U.S. Bank Asset Management Group. The effective tariff rate today is near 5% but is expected to exceed 10% in the months to come.

U.S. Effective Tariff Rate

“What makes this more challenging for markets is that they are reacting to a single decision point, President Trump, in determining the potential tariff impact on corporate earnings,” says Haworth. “It makes the environment less certain when you have a single person controlling tariff policy.”

Awaiting more economic signals

The U.S. economy maintained relatively stable growth from mid-2022 through 2024. First-quarter 2025 Gross Domestic Product declined 0.5%, ² though signs point to a resumption of positive growth as 2025 continues. However, most analysts project slow GDP growth over the course of the year. For example, in its latest Summary of Economic Projections, the Federal Reserve’s Open Market Committee estimated 2025 GDP growth of just 1.4%, compared to 2024’s 2.4% growth rate. ³

In the meantime, inflation as measured by the Consumer Price Index (CPI) and the unemployment rate have both remained stable in recent months. CPI stands at 2.4% and the unemployment rate at 4.2%. ⁴ “To be determined is the future direction of inflation,” says Sandven. “That will help determine the direction of interest rates and likely impact the direction of capital markets.”

According to Haworth, “One of the biggest concerns associated with tariffs is  their potential inflationary impacts. To date, tariff costs are not yet fully incorporated into inflation data.” Haworth anticipates a variety of corporate responses to manage requirements to pay escalated tariff rates on imported goods. Some companies plan to pass costs on to consumers, some will try to recover the difference from exporters, and some will allow tariffs to reduce profits.” Haworth states that on balance, inflation consequences are probable.

President Trump pushes for interest rate cuts

The Federal Reserve (Fed) has kept the short-term federal funds target rate at 4.25% to 4.50% throughout the year. While President Trump has urged the Fed to cut rates, Fed Chair Jerome Powell has been firm that the Fed remains cautious and worried about potential inflation threats from the administration’s possible tariff increases. ⁵

Longer-term interest rates have stabilized in recent months. After reaching nearly 4.8% in January 2025, 10-year Treasury yields have mostly ranged between 4% and 4.6%. ⁶

President Trump’s legislative priority

While trade matters are at the top of investors’ minds, Congress is also working to pass a broad legislative package that has been referred to as the “One Big Beautiful Bill Act” (OBBBA). Most notably, the bill is designed to establish a federal budget for fiscal 2026, increase the nation’s debt ceiling (the government’s ability to issue debt), and extend tax provisions first set in 2017’s Tax Cuts & Jobs Act. Modestly different versions of this expansive bill have passed both the House and Senate, but the matter is now back under House consideration. The House and Senate must ultimately approve the same measure.

“Markets know that Congress typically acts at the last minute, so it is not pricing in any resolution on the measure just yet,” says Haworth. He notes that if the comprehensive package is unable to gain immediate approval as a package, Congress could break apart various key provisions and address them individually, removing some time pressure.

Constructive economic fundamentals buoy investor sentiment

Investors still have reason to maintain a “glass half-full” outlook, although the outcomes of policy considerations, such as tariffs and tax policies, remain unresolved. The stable labor market, slowing inflation and constructive corporate earnings growth are key supports to this view. Diverse income sources, a global perspective on asset classes, and an investment strategy tied to risk and liquidity constraints sourced through a financial plan can help you meet the financial goals that matter most to you.

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