Mr Trump praises the market and then proceeds to endanger it

ON 6TH JULY, sitting in the Oval Office, Donald Trump rang the opening bells for the New York Stock Exchange and Nasdaq. "I think the market's going to go through the roof." The ceremony was designed to launch "Trump Accounts", a new tax-deferred investment vehicle for children - one of the centrepieces of the Republicans' big 2025 tax and spending legislation. Mr Trump was tying his presidency to the stock market the way no previous president has tried to, as November's midterm elections approach.

The gesture was also a political calculation. Only 33% of American adults approve of Mr Trump's economic leadership, according to a June survey by the Associated Press-NORC Centre for Public Affairs Research. High inflation is eating his popularity the way it ate Joe Biden's. So the message is simple: look at the rally, look at the market, look at the wealth in your 401(k).

The trouble is that Mr Trump is simultaneously conducting the policies most likely to reverse it. Within three weeks of his Oval Office proclamation, his administration had imposed new tariffs on roughly 60 countries, levying duties of at least 10% on nearly all imports. This was the latest attempt to rebuild his tariff regime after the Supreme Court struck down the previous one, justified this time by alleged failures of trade partners to prevent forced labour in their supply chains. And in the background continues the war with Iran, which has already produced what the International Energy Agency calls "the largest supply disruption in the history of the global oil market".

The incentive structure is the first thing to notice. Mr Trump needs the market to remain buoyant to sustain his political standing. But the tools he favours - tariffs, confrontation, sanctions - are inflationary by construction. Tariffs raise the cost of imported goods. A war that closed the Strait of Hormuz in March sent Brent crude above $120 a barrel; the average American now pays $4.09 per gallon of gasoline. The consumer price index has climbed 4.2% over the past year, up from 3% when Mr Trump took office in January 2025.

These are not unconnected facts. They are the mechanism by which his favoured policies generate the very pressure that undermines his preferred metric of success. The system is eating its own tail.

To be sure, the market has not yet fallen. The S&P 500 hit an all-time high of 7,621 in June and was up roughly 10% this year through early July. But the index has since retreated about 2% and posted two consecutive weekly declines by late July. Bank of America analysts have warned that speculation is "hitting extreme levels", reaffirmed a year-end target of 7,100 - a potential drop of around 5% from the week's closing level at the time of the forecast - and predicted that the Federal Reserve, under its new chairman Kevin Warsh, will hike interest rates three times this year. The S&P 500 is, at present, more expensive ahead of a tightening cycle than at any point since the dot-com era.

That is the part Mr Trump's Oval Office photo-op cannot address. Markets absorb optimism until they cannot. The current valuations embed expectations of sustained earnings growth, continued central-bank patience, and an absence of geopolitical shock. Mr Trump's policies are chipping away at all three. Tariffs reduce corporate margins or force price increases that fuel inflation. A paused but unresolved war with Iran keeps oil volatile; at the end of July, Iranian ballistic missiles struck a base in Jordan, killing three American soldiers, and Brent crude surged back to $91 a barrel. The Federal Reserve faces the stagflationary bind of rising prices and weakening growth - exactly the combination that makes rate decisions painful either way.

Mr Trump also leans on the market as proof that ordinary Americans are better off. Yet Treasury Secretary Scott Bessent admitted that 38% of American families have no exposure to equities at all. The S&P 500's gains accrue largely to affluent households, or to retirement accounts whose beneficiaries are decades from needing the money. The people paying $4.09 for a gallon of petrol do not have a diversified index fund. They have a dashboard.

The deeper problem is institutional. When a president treats the stock market as his performance review, he creates a perverse incentive to prioritise headline valuations over structural health. A market that is propped by optimism about AI-driven productivity while being undermined by tariffs and energy shocks is not a healthy one. It is a brittle one. The question is not whether Mr Trump is wrong to hope for higher prices. It is whether the policies he favours can sustain the conditions that produce them.

They cannot. The better answer would be to separate political credibility from a single financial indicator, to manage the war in Iran towards a negotiated settlement rather than an escalation trap, and to accept that tariffs are a blunt instrument that rarely rebuilds the industries they claim to save while always raising costs for consumers. A president who genuinely wanted the market to go through the roof would, among other things, stop doing the things most likely to break it. That bargain is breaking.