The $36 Trillion Reason Markets Are Plunging

Robert Ross|March 18, 2025

The S&P 500 is off to one of its worst starts of the year in a century – all because investor expectations shifted.

2025 began with market optimism.

Many analysts, including me, expected the incoming Trump administration to focus on growth-oriented policies like taxation, deregulation, and cutting government waste.

Markets priced in these favorable policies preemptively, sending the S&P 500 up 8% and Nasdaq up 11% to record highs.

Now, these favorable policies are being “priced-out” while unfavorable near-term policies are being “priced-in.”

Markets are reversing course as optimism fades and reality sets in.

Here are the policy shifts driving this dramatic turnaround… and why they matter to investors.

Trump’s New Plan: Pain Now, Gains Later?

Investors banked on the “old Trump” playbook: deregulation, tax cuts, and business-friendly policies.

Instead, they got chaos.

Trump’s unpredictable tariff announcements have wiped $5 trillion from U.S. stocks since taking office.

During his first term, Trump treated the market as his personal scoreboard.

When stocks plunged, he’d quickly backpedal, issuing calming statements that steadied markets – establishing a “Trump put” similar to the famous “Fed put.”

This reliable pattern built investor confidence, triggering swift rebounds.

This time around, things are different.

Trump and his Treasury Secretary Scott Bessent openly admit the current market turmoil is intentional.

They describe the volatility as an economic “detox” or “transition,” acknowledging their policies might cause a recession.

Why would any politician deliberately trigger economic pain, especially someone who built his reputation partly on stock market performance?

Targeting America’s Wealthy

U.S. markets have shed $5 trillion since Trump’s inauguration, primarily due to his aggressive tariff stance.

But here’s the catch: this pain hit wealthy investors the hardest – the people who own most of the stock market.

Remember, just 8% of Americans own 94% of all stocks.

These affluent households, responsible for nearly half of consumer spending growth, are exactly who Trump is targeting.

Why?

Because Trump and Bessent want those investors to panic-sell stocks and move into cash.

Here’s the thing – cash doesn’t just sit idle in your brokerage account. It gets parked into safe, short-term instruments like U.S. Treasury bonds.

As more cash floods into Treasurys, bond prices rise, and yields drop.

That, ladies and gentlemen, is the main goal here.

America has a $36 trillion national debt problem.

Our interest payments exceed $1 trillion per year, surpassing defense spending.

Trump and Bessent are trying to refinance around $9 trillion of debt coming due at much lower rates.

Ask yourself: Would you rather refinance debt at a 5% rate or at a far more manageable 2.5%?

Historically, the easiest way to push interest rates significantly lower has been through recessionary pressures.

Economic downturns force the Fed’s hand, leading to rate cuts and sharply lower bond yields.

Think of the administration’s efforts as a “controlled demolition” of the U.S. economy.

Trump and Bessent are intentionally shaking the financial markets to scare wealthy investors out of stocks and into Treasurys, making it cheaper to refinance our debt.

Don’t get me wrong, I don’t love this strategy, especially as someone who owns a lot of stocks and crypto. It’s painful. But I also understand their logic.

Inflation won’t go away, housing costs have skyrocketed, and our economy runs on borrowed money.

Tackling these issues head-on, however painful, could pave the way for healthier, sustainable growth.

Short-term chaos for long-term stability.

The Next Few Months Will Likely Be Bumpy

This strategy mirrors the “Volcker shock” of the 1980s, when Fed Chair Paul Volcker deliberately triggered a recession to tame inflation. The short-term pain led to decades of prosperity.

As investors shift from expecting “pro-growth” policies to bracing for “controlled demolition,” market volatility will persist.

The truth is, no one can predict exactly how this plays out, especially with Trump’s unpredictable nature.

Yesterday’s winning investments may struggle in this new reality.

That means it’s time to recalibrate your portfolio: cut weaker positions below critical support levels (like the 200-day moving average), hold high-quality long-term investments, and maintain some dry powder to capitalize on new opportunities as they emerge.

Because if Trump and Bessent succeed, we’ll eventually get lower rates, a lighter debt burden, and a stage set for a fresh, more durable bull market.

The bad news?

Things could still spectacularly backfire.

But no matter how this unfolds, I’ll be here to guide you through the chaos.

Editor’s Note: While much of the market has teetered and tottered thanks to Trump’s agenda… there’s one stock that’s riding just one path: straight up. It’s gained a solid 14% in just the past month… and a stunning 30% year to date! No surprise, then, that it’s far above its 200-day. Get all the details on this market-beater right here.