Trump Bull Market will be Shattered by the Fed: Motley Fool

From a purely statistical standpoint, Wall Street loves President Donald Trump.

While several catalysts are fueling this bull market rally, there’s also an unlikely headwind that threatens to halt this seemingly unwavering optimism in its tracks: the Federal Reserve.

While getting from point A to B was a roller-coaster ride, the widely followed Dow Jones Industrial Average, broad-based S&P 500, and growth stock-dependent Nasdaq Composite soared 57%, 70%, and 142%, respectively, during Trump’s first, nonconsecutive term in the Oval Office, Sean Williams reported for Motley Fool..

Since his inauguration on Jan. 20, 2025, the Trump bull market has taken shape yet again.

The Dow, S&P 500, and Nasdaq Composite have climbed by 13%, 15%, and 18%, respectively, through the close of trading on Feb. 3, 2026.

While several catalysts are fueling this bull market rally, some of which can be directly attributed to Trump’s policies, there’s also an unlikely headwind that threatens to halt this seemingly unwavering optimism in its tracks: the Federal Reserve.

One reason for this persistent optimism has been Trump’s flagship tax and spending laws.

In particular, the Tax Cuts and Jobs Act (TCJA), signed into law in December 2017, permanently reduced the peak marginal corporate income tax rate from 35% to 21% (the lowest level since 1939).

Although the purpose of lowering taxes for businesses is to encourage hiring, acquisitions, and innovation, perhaps the most visible effect of the TCJA has been a significant increase in share buybacks.

Share repurchases for S&P 500 companies are estimated to have topped $1 trillion in 2025, representing an all-time high.

For time-tested companies with steady or growing net income, buybacks can help boost earnings per share, making their stock more fundamentally attractive. Unfortunately, the current dynamic at the central bank is anything but calming.