By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel consensus is bearish, with key risks including stagflation, multiple contraction due to higher rates, and potential margin compression in tech supply chains. The main opportunity lies in AI-exposed firms potentially thriving on liquidity, but this is dependent on tariff pass-through and consumer demand.
Risk: Stagflation and multiple contraction due to higher rates
Opportunity: AI-exposed firms thriving on liquidity
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Some of the stock market's largest single-session declines throughout history have occurred under President Donald Trump. Despite this volatility, we've also observed outsize annual returns with Trump in the White House.
Statistically, the annualized returns of the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) have been higher under President Trump than under most other presidents since the late 1890s. During his first non-consecutive term, the Dow, S&P 500, and Nasdaq Composite skyrocketed 57%, 70%, and 142%, respectively.
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Donald Trump, who's frequently used stock market gains as a measure of his administration's success, doesn't believe this bull market is anywhere close to its finale. While recent comments make it clear that the president expects the stock market to "go through the roof," the irony of his statement is that his own policies may prevent that from happening.
Since early June, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have all rallied to fresh all-time highs. Although not every catalyst responsible for lifting the stock market to new heights can be traced to President Trump, he's had an undeniable role in lifting the tide on Wall Street.
For example, businesses have been particularly fond of Trump's tax policy. The Tax Cuts and Jobs Act, signed into law by Trump in December 2017, permanently lowered the peak marginal corporate income tax rate from 35% to 21%. Companies retaining more of their earnings have driven record share buybacks and increased investment in high-growth initiatives, such as artificial intelligence (AI).
The Trump administration also took a sizable stake in Intel last year, a move that, in hindsight, has restored faith in the struggling chipmaker. While the evolution of AI has occurred organically, it nevertheless received a boost of encouragement from the Trump administration buffering Intel's coffers.
NOW: President Trump says today's newborns could have a major financial head start by the time they turn 18 thanks to Trump Accounts.
-- Fox News (@FoxNews) July 6, 2026
While promoting today's launch, he touted early investing as a way to create long-term wealth, while pointing to recent gains in the Dow, Nasdaq,... pic.twitter.com/L2u22leB1J
The newest Wall Street catalyst, courtesy of the president, is Trump Accounts. These recently launched tax-advantaged accounts for U.S. children born between Jan. 1, 2025, and Dec. 31, 2028, may qualify for a $1,000 initial government contribution. Trump Accounts are designed to be invested in the stock market, further fueling buying activity on Wall Street.
While ceremoniously ringing the opening bell for the New York Stock Exchange and Nasdaq from the Oval Office on July 6, Trump told reporters:
It's going to go up -- I think the market's going to go through the roof.
When examined over multiple decades, the president's prognostication is likely correct. Dating back to the start of the 20th century, data from Crestmont Research show that the S&P 500 has never produced a negative rolling 20-year total return, including dividends. No matter what headwinds were thrown Wall Street's way, the stock market has always found a way to "go through the roof" over the long term.
However, the remainder of Donald Trump's second term is a different story. Though the president believes the stock market is going to blast to new highs, some of his own policies can halt the Trump bull market in its tracks.
Although lower corporate income tax rates have been beneficial, Trump's tariff and trade policy and the Iran war threaten to upend the stock market for the same reason: inflation.
A modest degree of inflation is a good thing for the U.S. economy. Since January 2012, the Federal Reserve has targeted a 2% long-term inflation rate. When the U.S. economy is firing on all cylinders, businesses should possess modest pricing power on their goods and services.
However, both of the president's key policies of his second term have pushed the U.S inflation rate well beyond "modest."
Recently, the Trump administration announced a new round of tariffs, ranging from 10% to 12.5%, on more than 80 countries. Although tariffs are designed to protect domestic manufacturers and make U.S. goods more price-competitive with those being imported, they don't always have that effect.
TRUMP JUST IMPOSED NEW TARIFFS ON 60 COUNTRIES STARTING TODAY.
-- Bull Theory (@BullTheoryio) July 24, 2026
The Supreme Court struck down Trump's original "Liberation Day" tariffs in February. In response, Trump imposed temporary 10% global tariffs as a placeholder.
Those tariffs were set to expire today, and today's new... pic.twitter.com/eoc3EFbs37
In particular, four New York Federal Reserve economists writing for Liberty Street Economics ("Do Import Tariffs Protect U.S. Firms?") found that input tariffs drove manufacturing costs higher after Trump imposed tariffs on China in 2018-2019. An input tariff is an added duty on an unfinished good, such as raw metals, used to complete the manufacture of a product in the U.S. Former Fed Chair Jerome Powell frequently cited Trump's tariffs as a catalyst for above-average inflation.
Additionally, the Iran war is having several adverse impacts on the prevailing inflation rate. Iran's closure of the Strait of Hormuz has halted the flow of a fifth of the world's petroleum liquids. The result has been a rapid rise in fuel prices. Though headline inflation eased to 3.5% in June, prices rose at the fastest pace in three years (4.2%) in May, driven almost entirely by soaring energy costs.
Moreover, we're witnessing evidence that Iran-war-driven inflation is spilling over into the broader economy. The price stickiness of Core Personal Consumption Expenditures indicates that consumers are feeling the pinch outside the energy sector. Companies having to alter shipping routes, change suppliers, and pay more for certain petroleum-based inputs (e.g., plastics) are all examples of higher costs that can be passed on to consumers.
The Fed's preferred measure of inflation (Core PCE) moved up to 3.4% in May, the highest level since October 2023.
-- Charlie Bilello (@charliebilello) June 25, 2026
This was the 63rd consecutive reading above the Fed's 2% target level.
"We've missed for 5 years. And we're gonna fix that."-Kevin Warsh last week pic.twitter.com/Wtayfgt8sq
Persistently above-average inflation is the catalyst that can force Fed Chair Kevin Warsh and the Federal Open Market Committee (FOMC) into action. While the FOMC raising rates wouldn't normally be a cause for concern on Wall Street, higher borrowing costs could be a significant issue for today's stock market.
The Dow, S&P 500, and Nasdaq Composite have soared on the heels of the AI data center build-out, which is being partially financed with corporate debt issuances. If higher interest rates slow this expansion, corporate sales and earnings growth rates could fall, and the second-priciest stock market in history, which has zero margin for error, can tumble.
A strong argument can be made that President Trump's current policies are more likely to send the stock market tumbling through the floorboard (in the short term) than launch it through the roof.
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Sean Williams has positions in Intel. The Motley Fool has positions in and recommends Intel. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Trump’s pro-corporate tax and savings policies provide durable support that likely offsets near-term tariff and energy inflation risks, leaving the broad market range-bound rather than primed for disaster."
The article correctly flags tariff-driven input cost inflation and Strait of Hormuz disruption as near-term risks that could keep Core PCE sticky above 3% and force Fed Chair Warsh to hold or hike rates. That would raise corporate borrowing costs for the AI capex binge, pressuring the second-priciest equity market on record (S&P 500 forward P/E ~21x against slowing EPS growth). Yet it glosses over that Trump’s permanent 21% corporate tax rate and new Trump Accounts are structural tailwinds for after-tax ROE and incremental equity demand. Historical 20-year S&P 500 returns have never been negative; volatility under Trump has been high but compounded returns still outpaced most presidents.
If tariffs are quickly negotiated down and Hormuz reopens within 90 days, the inflation scare evaporates, freeing the Fed to cut and sending the AI trade back to new highs—exactly the 'through the roof' outcome Trump predicts and the article dismisses.
"The combination of broad-based tariffs and supply-side energy shocks creates a structural inflation floor that will force a valuation re-rating of the S&P 500."
The current market environment is trapped in a classic stagflationary feedback loop. While the article highlights the 'Trump Account' liquidity injection, it misses the structural damage caused by the 10-12.5% global tariff regime. By forcing a cost-push inflation scenario, the administration is effectively neutralizing the benefit of the 21% corporate tax rate. With Core PCE at 3.4% and the Strait of Hormuz conflict keeping energy prices elevated, the Fed's Kevin Warsh is boxed in; he cannot cut rates to support the AI capex cycle without fueling further inflation. At current valuation multiples, the market has zero margin for error regarding earnings misses. I expect a significant multiple contraction as the cost of capital remains higher for longer.
The AI infrastructure build-out may be so transformative to productivity that it offsets inflationary pressures, allowing corporate margins to expand even in a high-rate environment.
"The article's stagflation thesis depends critically on Fed tightening, but the Fed may opt to pause or cut if growth falters alongside inflation—a scenario that would flip the bearish case entirely."
The article conflates two separate timeframes—long-term (20+ years) with near-term (2-3 years)—then uses the former to justify ignoring the latter. Trump's tariffs and Iran war are genuinely inflationary; Core PCE at 3.4% is sticky and rising. But the article assumes the Fed *must* raise rates aggressively, which isn't certain if growth slows simultaneously. The real risk: stagflation scenario where rate hikes crush equity multiples while earnings decelerate. However, the article undersells one counterpoint: if tariffs boost domestic capex and labor demand faster than inflation spreads, equities could re-rate higher despite higher rates. The timing and magnitude of both effects remain genuinely uncertain.
If the Fed holds rates steady (citing growth concerns) while tariffs prove transitory or get negotiated down, the inflation scare evaporates and the AI capex boom continues uninterrupted—exactly the scenario the article dismisses too quickly.
"Policy uncertainty and inflation/monetary tightening risks could undercut any Trump-driven upside despite tax cuts and AI investment."
Short take: the piece mixes plausible tailwinds for equities (the corporate tax framework, buybacks, AI capex) with a one-sided forecast about Trump’s policies. The strongest risk the article glosses over is policy missteps: new tariffs and escalation could lift inflation and force the Fed to tighten, hurting valuations. Iran-related energy shocks, supply-chain disruption, and higher debt service costs for corporates could throttle growth even if earnings stay solid. The 'Trump Accounts' concept is unproven as a macro accelerator and could become a fiscal drag over time. Valuations in tech/AI hardware look stretched relative to the earnings backdrop.
The strongest counter is that markets don’t need policy certainty to rally; earnings, global demand, and secular AI adoption can drive returns regardless of who leads. If tariffs falter and inflation remains contained, the 'Trump rally' narrative could be simply a political echo rather than a structural boost.
"Tariff-hoarding dynamics could force faster margin erosion and deeper multiple contraction than the panel has priced."
Claude correctly flags the timeframe mismatch but underweights second-order effects: sustained Hormuz disruption plus 10%+ tariffs could trigger inventory hoarding and margin compression in tech supply chains by Q3, accelerating the multiple contraction Gemini anticipates. Warsh holding rates isn't neutral here—it validates the stagflation path nobody has fully modeled into forward P/E compression beyond 18x.
"Trump Accounts may provide enough liquidity to prevent a demand-side collapse, leading to a bifurcated market rather than a uniform multiple contraction."
Gemini’s stagflation thesis ignores the fiscal reality: the 'Trump Accounts' act as a direct liquidity bypass to the consumer, potentially offsetting cost-push inflation. If these accounts effectively subsidize household consumption, we aren't looking at a traditional stagflationary demand collapse, but rather a 'melt-up' scenario where nominal earnings growth outpaces inflation. The real risk isn't just multiple contraction; it's a bifurcation where AI-exposed firms thrive on liquidity while mid-cap industrials are crushed by tariff-driven input costs.
"Tariff pass-through elasticity, not liquidity, determines whether we get bifurcation or synchronized earnings deceleration."
Grok's inventory-hoarding scenario by Q3 is plausible but timing-dependent. The real gap: nobody's quantified how much tariff pass-through actually sticks versus gets absorbed by margin compression. If corporates can't raise prices without demand destruction, the 'melt-up' bifurcation Gemini describes collapses—AI winners can't escape gravity if their customers (industrials, retail) are margin-squeezed. That's the stagflation trap, not liquidity.
"Overlooked risk is corporate refinancing and debt maturity walls in a high-rate regime that could drag AI-capex borrowers and the market."
Gemini’s stagflation angle is incomplete. It assumes pass-through stays sticky and demand deserts equities. If tariffs ease and policy liquidity lands in households, AI capex could re-accelerate, supporting margins and multiples even with higher rates. The overlooked risk: corporate refinancing and debt maturity walls in a high-rate regime. A few large AI capex borrowers could drag index-level credit costs higher if funding conditions tighten faster than earnings recover.
The panel consensus is bearish, with key risks including stagflation, multiple contraction due to higher rates, and potential margin compression in tech supply chains. The main opportunity lies in AI-exposed firms potentially thriving on liquidity, but this is dependent on tariff pass-through and consumer demand.
AI-exposed firms thriving on liquidity
Stagflation and multiple contraction due to higher rates