In today’s Finshots, we tell you why Trump’s administration is deliberately pulling down the stock markets and if that bold plan could work.

But before we begin… We’re on the lookout for a Financial Writer!

If you love finance and have a knack for storytelling, this is your chance to join Finshots. We simplify business and finance for 5,00,000+ readers every day, and now, we’re looking for someone who can break down market trends, economic policies and business stories into crisp, engaging reads.

If this sounds like you, or you know someone who’d be perfect for the role, apply here or share it with them.

Also, if you’re someone who loves to keep tabs on what’s happening in the world of business and finance, then hit subscribe if you haven’t already. If you’re already a subscriber or you’re reading this on the app, you can just go ahead and read the story.

The Story

When Trump ran his presidential campaign, one big promise he made was to boost the stock markets. He’s always been vocal about it. But reality is painting a different picture. In the last month, US stock indices have plunged 8%, wiping out $4 trillion in market value.

So, what’s going on?

Well, there are two fascinating theories behind this unexpected dip.

The first is that this could be a well-orchestrated drama by what Trump calls “globalists”.

Now, who exactly are these globalists? No one knows for sure, but Trump might be referring to foreign investors holding massive amounts of US Treasury bonds (bonds issued by the US government). Take China, for instance. The US buys more from China than the other way round, creating a trade deficit. This leaves China with excess US dollars, which it then recycles into US banks by buying Treasury bonds, essentially lending money back to America for safe returns.

But if Trump shrinks this trade deficit, China has fewer dollars to invest in US banks. Less money flowing into banks means lower profits and potentially another banking crisis. And investors sense this risk, so they’re selling stocks before things get worse.

That brings us to the second, and perhaps more crucial theory for today’s story: The Trump administration itself might be allowing the stock market to fall on purpose.

Sounds bizarre, right? After all, a rising stock market usually signals economic strength, something any president would want. But Trump’s strategy might be different because here’s the thing.

US Treasury Secretary Scott Bessent believes that under the Biden administration, economic policies favoured the top 10% of Americans or those wealthy enough to fuel spending and drive consumption. But the bottom 50% haven’t gained much. So while everything might look great on paper, in reality, half of America could still be struggling.

This imbalance paints a misleading picture, and the Trump administration wants to flip that script. And their way of doing it? Create as much economic chaos as possible.

How’s that, you ask?

By shifting the US economy from a consumer-driven economy (the demand-side) to one powered by businesses and investments (the supply-side). The logic behind this is simple. American consumer spending has kept the economy afloat for decades. But this dependence has also led to high debt, dangerous economic bubbles and rising inflation.

Just look at US debt. It’s currently at a staggering $34 trillion. And $7 trillion of that needs refinancing soon at interest rates that recently hit alarming highs of around 4.8%. It’s like refinancing your home loan at peak interest rates, except now, it’s trillions at stake. Not ideal, right? That’s why the US keeps pushing its debt ceiling limits.

That’s exactly why Trump might prefer a falling stock market now. A falling market triggers investor panic, who then pull out of risky stocks and pour money into safer US bonds. More demand for bonds pushes their prices up, which in turn brings their yields or interest rates down. And that’s exactly what Trump wants.

And this seems to be working. To put things in perspective, the 10-year Treasury yield has already dropped from 4.8% in January to 4.25% today. That may be a teeny tiny shift. But when you’re refinancing trillions, even half a percent saves billions of dollars.

But there’s more to the plan. Trump and his economic advisors believe that a controlled slowdown will reset inflated asset prices and pave the way for a healthier recovery.

And that’s where tariffs come into play.

You see, in theory, tariffs drive up inflation. After all, making imports costlier means consumers pay more. But here’s the twist. Trump’s unpredictable tariff policies are spooking investors so much that they’re more worried about a market slowdown than inflation. So, they’re dumping stocks and buying bonds, effectively giving Trump exactly the market reaction he desires. And he knows it. That’s why he keeps tweaking his tariff stance almost every other day.

It’s almost comical when you think about it. But this sums it up perfectly:

But tariffs are just one piece of the puzzle. Another big move is cutting government spending.

As Scott Bessent bluntly put it, and we quote: “There’s going to be a natural adjustment as we move away from public spending… The market and the economy have just become hooked, and we've become addicted to this government spending, and there's going to be a detox period.”

And this detox includes slashing government jobs, cutting medicare, reducing food assistance and shrinking housing aid. All of this weakens the demand-side of the economy that we spoke of earlier, reducing consumer-driven growth.

On the flip side, Trump wants to boost the supply side with lower corporate taxes and deregulation, hoping businesses will take the lead.

And all of this begs the question – will this complex approach work?

Well, all of these moves fall under what’s called the proverbial ‘kitchen sinking’ — frontloading maximum economic pain now to rebuild a stronger foundation for tomorrow. And Trump’s team seems fully committed to it, pushing tariffs, cutting social programs and rolling out tax breaks for businesses. That explains the market’s fall.

But there’s a catch. A strategy like this could tip the economy into a full-blown recession.

Markets are already on edge. JPMorgan CEO Jamie Dimon warns that an ‘America First’ approach is fine, but ‘America alone’ could backfire. Canada is already threatening to cut electricity exports to the US, something that could hurt American consumers.

And recession risks are rising. Prediction market Kalshi now pegs US recession odds at 40% this year. Meanwhile, expectations for multiple rate cuts in 2025 have shot up — exactly what Trump is aiming for.

But Trump’s supporters argue that this is just a strategic short-term pain for long-term gains. Lower interest rates and stronger business investment could help ‘Main Street’ over Wall Street.

But what about everyday Americans?

A crashing stock market can ruin their retirement savings and wealth. And timing is everything. Restructuring an economy isn’t instant. It’s messy, political and can take years. Businesses and consumers plan for the long term. And if this transition drags on, the pain might last longer than Trump anticipates.

For example, Pittsburgh aluminum major Alcoa’s CEO William Oplinger warns that aluminum production decisions span 20 to 40 years. But if tariffs keep shifting, businesses may hesitate to invest in the US.

And it’s not just the critics arguing. Even Federal Reserve Chair Jerome Powell is cautious, saying: “The costs of being cautious are very, very low. The economy's fine. It doesn't need us to do anything, really. And so we can wait, and we should wait.”

But patience isn’t Trump’s style. For him, immediate action and disruption are essential and that’s how he’s shaking the markets now.

Will this gamble pay off or backfire?

The answer in the end is that both sides (the supporters and critics) will face the same reality. It’s just that not everyone sees it yet. But when the full impact kicks in, one group is bound to be upset and furious about it.

Maybe the signs will start showing in the next few days as interest rates shift. And with the upcoming US monetary policy decision, all eyes will be on what happens next.

Until then…

Don’t forget to share this story on WhatsApp, LinkedIn and X.

Only 17% of millennials have a term plan❗

Here’s why getting a term plan early can do wonders for you & your family:

✅Protection: Simply put, term insurance is where you pay a small amount of money in exchange for a large amount of protection. This protection usually kicks in in the event the policyholder passes away.

But not just that, if you ever develop a critical illness (eg. cancer) and have to quit your job, a term plan can give you a lump sum amount to make up for the lost income.

✅Secure Your Parents: As your parents near retirement, they may start to rely on your income. And so, a term plan will give you peace knowing that they'll be financially supported even in your absence.

✅Low Premiums Forever: A term plan of ₹1 crore will cost you much lower premiums at 25 years than at 35. You can even get a ₹1 crore cover for as little as ₹10,000 a year if you are young and healthy. Plus, once these premiums are locked in, they remain the same throughout the term!

So don’t delay it! As they say, “The best time to buy term insurance was yesterday; the next best time is today.”

Click here to book a FREE call with Ditto Insurance’s certified advisors and get your personalised term insurance guidance.