Wall Street thought it had an ally in Donald Trump. He's becoming more of an adversary.
The president largely delivered to investors last year, as his administration cut taxes, reduced spending and rolled back an aggressive tariff plan after it spooked markets.
Now, after blindsiding Wall Street with a series of rapid-fire moves in the span of a week, Trump appears to be putting it on notice. He has sought to block large investors from buying houses, called for a cap on credit-card rates and announced restrictions on executive pay and stock buybacks.
Then came the most stunning move of all: The Justice Department's criminal investigation of Federal Reserve Chair Jerome Powell in what he said was an intimidation tactic to lower interest rates.
"Investors thought after the April 2025 tariffs that uncertainty around policy would magically go away," says Brad Golding, a hedge-fund manager at Christofferson Robb & Co. in New York. "Now, we're seeing that midterm elections mean more than the profitability of banks and the stability of markets."
News of the investigation, which prompted JPMorgan Chase Chief Executive Jamie Dimon and others in the banking world to defend the Fed, was an escalation in Trump's pressure campaign on the Fed to lower rates. It was a clear message that voters' concerns about the cost of living, and not investors, are now top of mind.
On Monday evening, Trump issued his latest broadside against business on social media, saying he was working with Microsoft and other tech giants to make sure consumers don't "pick up the tab" for higher electricity prices as heavy investment in artificial intelligence fuels power demand from data centers.
White House spokesman Kush Desai said in a statement that multiple record stock market highs and rising real wages show Trump can "unleash historic prosperity" for consumers and investors alike.
Investors can't say they weren't warned. Administration officials have spent over a year saying they were going to try to help consumers and others, even at the expense of investors.
"For the last four decades, Wall Street has grown wealthier than ever before...for the next four years, it's Main Street's turn," Treasury Secretary Scott Bessent told a group of bankers last April.
Investors are bracing for the next surprise from Trump that could drive stock moves. The administration has indicated more affordability proposals could be unveiled when he appears at the World Economic Forum next week.
"Expect the unexpected and position portfolios accordingly," said Dan Ivascyn, chief investment officer at Pimco, the bond powerhouse. Pimco has made changes to its portfolio, including buying more debt from non-U. S. issuers.
Already, Trump's call Friday evening for a temporary 10% cap on credit-card interest rates helped send shares of big card issuers and network-providers lower on Monday and Tuesday. Shares in Citigroup, American Express, Capital One, Mastercard and Visa all dropped between 4% and just over 7% in the span of those two days.
His plan, announced last week, to block big investors from buying up single-family homes dented shares of two big single-family landlords and Blackstone, which owns a smaller rival. The shares have recovered some since.
Stock indexes more broadly aren't reflecting too much concern, partly because investors have grown accustomed to Trump backing away from many ideas. Some proposals would require congressional backing, which might not materialize. House Speaker Mike Johnson (R., La.) signaled Tuesday that Trump's credit-card rate proposal would face a steep climb in Congress.
"The credit-card proposal will probably not happen -- and the same with the restrictions on institutional home buying," said Peter Boockvar, chief investment officer at One Point BFG Wealth Partners. "So markets are in wait-and-see mode."
The investigation into Powell drew immediate criticism from former Fed and Treasury officials and lawmakers, including from Sen. Thom Tillis (R., N.C.), a member of the Senate Banking Committee, and others who could hinder Trump's ability to get a replacement for Powell confirmed.
JPMorgan's Dimon and Bank of New York Mellon CEO Robin Vince both defended the Federal Reserve on calls Tuesday discussing their banks' quarterly results. Dimon said political interference with the Fed would cause inflation and interest rates to go up, rather than accomplish Trump's stated goal of lowering them.
The probe of Powell may even encourage him to stay on as a Fed board member after his term as chairman expires later this year, or bolster efforts to ensure that the next chairman has the independence to pursue policy.
Other proposals could also have unintended consequences, which could explain the market's subdued response. Cutting interest rates on credit cards, for example, could limit access to credit for lower- and middle-income consumers, trade groups have warned.
"Stopping institutional investors from buying homes to rent sounds good, too, but it could negatively hurt those families who want to live in a house but can't afford to buy," said Boockvar. "Also, it could dissuade home builders from adding new home supply to the market."
Trump's affordability push could hit other industries, not just the financial sector. The administration has suggested that it hopes to lower gasoline prices for U.S. consumers, potentially by adding Venezuelan oil to the market. Lower prices at the pump would help drivers but potentially weigh on the profits of energy companies.
Still, Wall Street analysts often look for reasons for optimism, even when news is unsettling. On Monday, Morgan Stanley told clients the Trump administration's efforts to give priority to housing affordability would help some consumer-related stocks. And if the administration offers incentives to home builders, encouraging them to boost housing supply, that could boost earnings of those companies.
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