The Shift in Trump’s Economic Focus: From Stock Market to Treasury Yields

President Donald Trump’s approach to measuring the success of his presidency has undergone a notable evolution. Historically, Trump closely tied his administration’s achievements to the performance of the stock market, often celebrating its gains as a reflection of his policies’ effectiveness. However, recent developments indicate a strategic shift in focus towards the 10-year Treasury yield as a key economic indicator. This change in perspective comes amidst significant stock market volatility, triggered by Trump’s unwavering commitment to his tariff policies, particularly against major trading partners like Canada, China, and Mexico.

Trump’s Commitment to Tariffs Despite Market Volatility

Despite the recent stock sell-offs, which have led to a 6% decline in the S&P 500 and pushed the Nasdaq 100 into correction territory, Trump remains resolute in his tariff strategy. His decision to impose new tariffs on goods from Canada, Mexico, and China, effective as of Tuesday, has been met with concern from investors seeking safer havens. The S&P 500, for instance, fell by 1.2% on Tuesday, erasing its post-election gains, while the Nasdaq 100 experienced early declines before closing with a 0.4% loss. This volatility stands in contrast to Trump’s earlier reactions, where such market downturns would have likely prompted alarm and potentially different policy responses.

The New Economic Metric: 10-Year Treasury Yield

In place of the stock market, Trump and his team have emphasized the 10-year Treasury yield as a critical economic barometer. Treasury Secretary Scott Bessent highlighted this shift, noting that the administration is focusing on borrowing costs for American consumers and businesses, which are closely tied to Treasury yields. Bessent’s remarks on FOX & Friends underscored the administration’s priorities: "Over the medium term, which is what we’re focused on, it’s a focus on Main Street. Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers."

Implications of the Shifting Focus for Wall Street

The administration’s new focus on the 10-year Treasury yield suggests a departure from the previous close alignment with Wall Street sentiment. Historically, Trump frequently boasted about the stock market’s performance, even sending autographed charts of market gains to figures like Lou Dobbs. However, recent events, including the sharp stock sell-off, have not prompted the usual queda from Trump, who has instead doubled down on his tariff policies. This shift has challenged expectations that Trump would intervene to stabilize markets, as predicted by Wall Street forecasters. As Bank of America strategists noted, a decline in the S&P 500 below a certain threshold could prompt "Stocks Down Under Trump" narratives and expectations of policy support.

Historical Context: Trump and the Stock Market

The stock market has long been a key indicator of Trump’s economic success, with the president frequently highlighting its performance as evidence of his policies’ effectiveness. In March 2020, for example, Trump sent an autographed chart of the Dow Jones Industrial Average to Lou Dobbs, showcasing the nearly 2,000-point rise following his declaration of COVID-19 as a national emergency. Such actions underscored the importance Trump placed on the stock market as a reflection of his administration’s success.

The Future Outlook: Balancing Tariffs and Economic Strategy

Looking ahead, Trump’s tariffs on Canada, China, and Mexico have already prompted retaliatory measures from Ottawa and Beijing, signaling potential ongoing trade tensions. Despite the recent sell-off, there are signs of possible compromises. Commerce Secretary Howard Lutnick suggested that Trump could announce tariff compromises with Canada and Mexico as early as Wednesday, which briefly lifted U.S. stock futures. Still, Trump acknowledged the potential disruptions caused by tariffs, stating, "Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly. There’ll be a little disturbance, but we’re okay with that. It won’t be much."

In conclusion, Trump’s strategic shift towards focusing on the 10-year Treasury yield and Main Street economic indicators marks a significant departure from his earlier emphasis on the stock market. While the recent stock sell-off has raised concerns, the administration’s commitment to its tariff policy and focus on broader economic measures suggests a calculated approach to navigating the current economic landscape. As the situation evolves, the interplay between tariffs, Treasury yields, and market sentiment will likely remain a critical area of focus for both policymakers and investors.