By Martin Baccardax
Early in President Donald Trump's first term at the White House, stocks set all-time highs with the Dow Jones Industrial Average topping 20,000 for the first time on record.
His social media messages moved markets, his forays into foreign policy impacted energy prices, and his tax-and-spending policies powered corporate earnings growth. The so-called Trump Bump lifted the S&P 500 nearly 5% between election day in November 2016 and the president's inauguration the following January.
Heading into the second year of his second term, investors are seeing much of the same suite of policies on the fiscal side, which has helped push the Dow toward 50,000 for the first time, with record highs for the S&P 500 alongside it.
But they're also starting to see a return of the president's meddling into areas beyond the remit of the White House, and that's raising a host of risks for markets heading into the fourth year of the current bull market.
The arrest and indictment of former Venezuela leader Nicolás Maduro has roiled energy markets and raised the specter of military interventions in other parts of the world, including Greenland, a territory controlled by NATO ally Denmark.
His liberal use of emergency powers to justify swaths of import tariffs has upended global trade, stoked inflation concerns, and set up an imminent Supreme Court decision that threatens to inject a major round of volatility into markets over the very near term.
More acutely, his recent social media messages have targeted the aerospace and defense industries, where he excoriated company bosses for taking big paychecks and handing out shareholder returns while failing to invest in new domestic production.
Trump also has taken aim at the housing market with a vow to stop institutional investors from purchasing rental homes.
Both Truth Social missives Wednesday whipsawed shares of Patriot missile maker RTX, and home buyers Blackstone and Invitation Homes, which fell sharply. His plan to "run" Venezuela, with U.S. oil companies pushed to help extract the nation's crude oil, has boosted shares of production giant Chevron and refiner Valero Energy.
In other words, it's 2017 all over again.
Market fundamentals are sound: Corporate earnings are likely to grow by nearly 16% this year, outpacing the advance of the S&P 500 and thus lower the price-to-earnings ratio of the world's biggest benchmark.
The economy is showing surprising resilience, as is consumer spending, and the much-hyped boost to inflation pressures from the president's tariff policies simply haven't materialized.
This time around, however, the risks to the president's micromanaging seem more acute.
U.S. debt is approaching $39 trillion, nearly double what it was in 2017, and the Committee for a Responsible Federal Budget said Trump's demand for a $500 billion increase in military spending will add at least $5.8 trillion to that tally over the next decade.
In 2017, Trump might have been content with taking companies to task via Twitter and demanding change from the bully pulpit of the White House.
This time around, the president's focus on defense contractors must be seen in the context of his targeting of the tech industry earlier this year, when he extracted a 10% stake in Intel and a share of the sale proceeds of China-bound chips from Nvidia. Adding defense contractors to that list isn't much of a stretch.
Trump's first-term activism in the energy markets largely was devoted to the XL pipeline that brings crude in from Canada's oil sands. His adventure in Venezuela, however, raises the risk of reprisals from China, which relies on South American supply, while sowing the seeds of suspicion among allies and foes alike in the Latin American region.
In 2017, Trump softened his stance on then Federal Reserve Chairwoman Janet Yellen, whom he had earlier accused of keeping interest rates artificially lower.
Today, he's poised to appoint a new Fed chair that will be tasked with that expressed purpose, raising major issues of central bank independence and blurring the line between monetary and fiscal policies.
Stocks had a great year in 2017, with the S&P 500 rising nearly 20%. But those returns disappeared the following year -- the benchmark had its worst performance in a decade -- amid rising market volatility, a U.S.-China trade war, and slumping megacap tech performance.
It all sounds eerily familiar.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 08, 2026 07:35 ET (12:35 GMT)
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