Earlier this month, the widely followed Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and tech-stock-dependent Nasdaq Composite (NASDAQINDEX: ^IXIC) all ascended to fresh record highs.
The stock market producing outsize annualized returns under President Donald Trump is nothing new. The Dow, S&P 500, and Nasdaq skyrocketed 57%, 70%, and 142%, respectively, during Trump's first, non-consecutive term. Lately, the artificial intelligence (AI) data center build-out, better-than-expected corporate earnings, and record S&P 500 share buybacks in 2025 have fueled upside for equities.
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But the Trump bull market may not be as healthy as the stock market's leading indexes suggest. Inflation is becoming a serious worry for Wall Street -- even as Trump himself believes investors should be looking beyond rising prices.
Donald Trump has repeatedly called on the FOMC to slash interest rates
If not for tariffs and the Iran war, perhaps the biggest story of Trump's second term has been his public feud with now-former Fed Chair Jerome Powell.
Since Trump's inauguration on Jan. 20, 2025, he's been critical of Powell and the Federal Open Market Committee (FOMC) for not aggressively slashing interest rates. The FOMC -- the 12-person body, including the Fed chair, responsible for setting the nation's monetary policy -- lowered the federal funds target rate on six occasions from September 2024 through December 2025. But the current range of 3.5% to 3.75% remains well above the president's touted target of 1% or below.
While Trump hasn't specifically mentioned why he's lobbied so vocally for lower interest rates, there are several implications. To start with, lower interest rates would incentivize businesses to borrow, thereby fueling the AI data center build-out and boosting hiring. The unemployment rate, while steady in recent months, has trended modestly higher over the last three years.
Rate cuts would also translate into lower Treasury bond yields, which in turn can indirectly drag down mortgage rates and make owning a home more affordable.
However, making it easier to service U.S. national debt by lowering borrowing costs might be the No. 1 incentive for the president. Federal deficits have topped $1.38 trillion every fiscal year since this decade began, and this trend simply isn't sustainable.