Donald Trump loves to use the stock market as a scoreboard. Interest rates will be the judge of that.

Published On Jan 17, 2025, 2:00 PM

Donald Trump, now in his second term, may face challenges as interest rates become the primary factor influencing the stock market. Since his election, the 10-year Treasury yield has risen, driven by expectations of inflation remaining high and fewer rate cuts from the Federal Reserve. This rise in rates correlates with falling stock prices—historically, increases in rates have led to market declines. Trump's capacity to influence interest rates is limited, especially as market participants worry about inflation returning due to his policies, potentially preventing further rate cuts by the Federal Reserve. The market appears wary as higher employment rates and inflation pressures could keep interest rates elevated, creating a volatile environment for equities.