Looking beyond President Trump's first 100 days in office

Review the latest Weekly Headings by CIO Larry Adam.

Key Takeaways

• Substantial shifts in U.S. trade Policy dent confidence
• U.S. assets broadly underperformed during trump’s first 100 days
• Policy pivot to growth-friendly tax cuts could boost confidence

This week marks the first 100 days of President Trump’s second term in office—and what a rollercoaster it has been for the financial markets! While presidents often enjoy a ‘honeymoon period’ at the start of their tenure, Trump wasted no time ‘flooding the zone’ by pushing forward many of his key initiatives. Without a doubt, the defining moment of President Trump’s first 100 days has been the most substantial shift in U.S. trade policy since the early 20th century, pushing the effective tariff rate to its highest level in over 100 years—north of 20% from only 2.5% at the beginning of the year. With 3.5 years remaining in President Trump’s second term, we aim to evaluate the impact of Trump 2.0 policy shifts on the economy and financial markets relative to prior presidents and provide our outlook for the next 100 days and beyond.

• A Reflection Upon The First 100 Days | Since retaking the Oval Office in January, President Trump has addressed a wide range of issues—from securing the border and tackling illegal immigration to reducing the size of the federal government. However, his decision to rewrite existing trade deals and reshape the rules of global trade has been the most ambitious and controversial move in modern history.
  1. Erratic Trade Policy Rollout Dents Confidence | The initial euphoria following President Trump’s victory last November has been tempered by the erratic rollout of the most aggressive tariffs in nearly a century and an escalating trade war. Although Trump was transparent about his intention to use tariffs to correct trade imbalances, the ‘shock’ of significantly higher tariffs has injected widespread economic uncertainty. The collapse in soft, survey-based data, such as weakening consumer, business, and CEO confidence, has raised concerns about the growth outlook, particularly if consumers and businesses start to pull back on their spending decisions.
  2. U.S. Assets Broadly Underperform | The S&P 500 hit a record high after inauguration day, but tariff uncertainty and unwinding overly optimistic sentiment drove the market into near bear territory, falling ~19% from its February peak and marking the worst start to a presidential term (down 7.3%) since 1974. As the S&P 500 dropped nearly 20%, Trump softened his stance on tariffs, aiding a recovery in global risk assets. However, international equities outperformed, with the Hang Seng, MSCI Europe, and EAFE indices outpacing the U.S. by ~20%, ~18%, and ~16%, respectively. The broad decline in the U.S. dollar (~-9%) reflected growing concerns about economic growth. Consequently, gold, which typically benefits during uncertainty, climbed 21%, while oil prices, sensitive to economic conditions, fell 22%. Despite recent Treasury market volatility, the 10-year Treasury yield saw its second-largest post-inauguration decline (-45 bps) since 1956.
• Looking Beyond The First 100 Days | While this 100-day milestone has been marked by elevated uncertainty, it's crucial to stay focused on what lies ahead. With Trump’s policy initiatives likely to continue at a rapid pace, here’s what we’ll be watching in the coming months:
  1. Policy Pivot To Tax Cuts Could Boost Confidence | President Trump’s decision to lead with a substantial shift in trade policy has forced the economy and financial markets to absorb the more financially challenging decisions upfront. However, Congress is quickly pivoting to more growth-friendly measures such as tax cuts, deregulation, and lifting the debt ceiling. Their goal is to get a budget reconciliation bill to President Trump’s desk before the August recess, allowing the Senate to pass legislation with only 50 votes instead of the usual 60. Timing is crucial, as progress could provide a much-needed confidence boost and prevent a self-fulfilling recession.
  2. Gearing Up For The Midterms | The chaotic tariff rollout has dented President Trump’s approval rating, with 55% of voters now disapproving of his handling of the economy—a trait that has historically buoyed his approval rating. However, Trump’s recent flexibility on tariffs suggests the worst-case scenario for the economy and financial markets has likely been avoided. With potential trade deals on the horizon (e.g., India, Japan, South Korea), a strong likelihood of rolling back aggressive tariffs, upcoming permanent tax cuts, and a Fed expected to resume easing, Trump hopes the economy will be on better ground for the midterm elections and the 250th anniversary of American independence on July 4, 2026. These ‘feel-good’ catalysts could trigger a growth rebound as we head into 2026.
  3. Fiscal Policy In Focus | Strong tax collections have given the Treasury some breathing room on the ‘x’ date—the point at which the government can no longer pay its bills—with the market focusing on the July-September period. The proposed debt ceiling increase of $4 to $5 trillion, which is likely to be attached to the reconciliation bill, could lead to some drama given the Republicans' razor-thin majorities in Congress. Hopefully, Treasury Secretary Bessent can emphasize the importance of avoiding any disruptions in the Treasury market that could undermine confidence in U.S. assets.

The Bottom Line | Despite tariff-related headlines and a slowdown in economic momentum (with an expected ~1% GDP growth in 2025), we believe a recession will be narrowly avoided. Although the next few months may bring elevated volatility, we remain optimistic about the S&P 500 in the long term. With positive economic growth and continued earnings expansion, our year-end target of 5,800 remains achievable.

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