The Other Trump Effect: Uncertainty

One of our most respected datapoints, 365 days-ahead S&P 500 forward earnings, has been in shallow decline for a month. This is very rare, and is always associated with sharp corrections in equities. Extended declines predict recessions, but we’re not there so far. After two quarters, and out two years, estimates remain very strong. Uncertainty is starting to set in with a flurry of economic policy moves by Trump in only his first month. Small business confidence ticked down, but still exceeds Biden’s highest reading. DOGE is driving uncertainty about employment, but we think most fears on that are exaggerated. Tariff risk remains, with Trump’s CEA chair a strong and radical advocate of restricting global trade. Trump’s approach to the Ukraine war is to frankly call an end to three years of extend-and-pretend. It evokes the possibility he will do the same thing with US deficits and debt, with rumors swirling of a “Mar-a-Lago Accord” that would force a restructuring of US debt held by foreign institutions – arguably, a default event.