Trump's Economic Advisor: No Market Crash in Sight

The White House economic advisor has made a bold statement: a market crash is not part of President Trump's strategy. This assertion comes at a time when geopolitical tensions and economic uncertainties are rife, making investors wary of potential market volatility. But what does this mean for the average investor, and how reliable are the indicators that suggest stability?

First, let's consider the broader economic policies that Trump has championed. His administration has pushed for tax cuts and deregulation, measures designed to stimulate economic growth and boost corporate earnings. These policies have historically led to stock market gains, as seen with the 2017 tax cuts that significantly increased corporate profits. However, Trump's protectionist trade policies, such as tariffs on Chinese goods, have led to trade wars and increased market uncertainty. This uncertainty can cause investors to become risk-averse, leading to market sell-offs.



The advisor's confidence in avoiding a market crash likely stems from several key economic indicators. The unemployment rate, for instance, has stabilized near 4% for the better part of the last year. This stability suggests a relatively healthy labor market, which is a positive sign for economic stability and market confidence. Consumer spending, powered by impressive gains in household wealth and 22 months of positive real wage growth, remains a key driver of economic growth. This indicates that consumers are confident and willing to spend, which is crucial for market stability.

Business fixed investment, while slowed after a string of strong prints, likely reflects the lagged impact of higher rates. However, the recent decline in mortgage rates and suppressed level of housing starts in 2024 suggests there is some room for revival in the housing market. This indicates that businesses are still investing, albeit at a slower pace, which is a positive sign for economic growth and market stability.

Government spending has also helped boost growth in recent quarters. While budget cutbacks could limit any meaningful support from federal or state and local government spending in the months ahead, the current level of government spending is still contributing positively to economic growth.

Inflation and interest rates are also important indicators. Inflation eased slightly in February 2025 but has trended higher since last September. This, in conjunction with policy uncertainty, prompted the Federal Reserve to hold rates steady during the first quarter. Interest rate volatility has remained a feature of the bond market and will likely remain elevated until the policy outlook clears. While inflation and interest rates are important indicators, the fact that the Federal Reserve has held rates steady suggests a cautious approach to managing economic stability.

In summary, while there are some areas of concern, such as policy uncertainty and interest rate volatility, the overall economic indicators point towards stability. The advisor's assertion that a market crash is not part of Trump's strategy aligns with this broader economic policy framework, as it acknowledges the need to manage these risks and maintain market stability. However, investors should remain vigilant and consider diversifying their portfolios to mitigate potential risks.