President Donald Trump Expects the Stock Market to "Go Through the Roof," but His Own Policies Can Prevent That From Happening

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.

President Trump delivering a speech. Image source: Official White House Photo.

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.

Stock market tailwinds have piled up under President Trump

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.

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

-- Fox News (@FoxNews) July 6, 2026

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.

Image source: Getty Images.

Two of Trump's policies have Wall Street primed for disaster

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.

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

-- Bull Theory (@BullTheoryio) July 24, 2026

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.

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

-- Charlie Bilello (@charliebilello) June 25, 2026

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.

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.