Forget Tariffs! This Is the Single Greatest Threat to the Trump Bull Market, and It’s Expected to Become a Reality on May 15.

From a statistical standpoint, Wall Street has loved having Donald Trump in the White House. Although the Dow Jones Industrial Average (^DJI 0.16%), S&P 500 (^GSPC +0.80%), and Nasdaq Composite (^IXIC +1.63%) usually rise under most presidents, the annualized returns under President Trump have been well above average.

During his first term, the Dow, S&P 500, and Nasdaq Composite gained 57%, 70%, and 142%, respectively. Meanwhile, these major indexes are up by 14%, 19%, and 24%, respectively, in his second, non-consecutive term, as of this writing on April 20.

President Trump speaking with the media. Image source: Official White House Photo by Molly Riley.

While there are ample catalysts powering this rally, including the rise of artificial intelligence and record S&P 500 share buybacks, there are also headwinds looking to knock stocks off their pedestal.

Although investors have previously focused on President Trump’s tariff and trade policy as the impetus that could halt the Trump bull market in its tracks, another far greater threat looms large — and it’s expected to become a reality on May 15.

Tariffs have historically been problematic for the stock market under Donald Trump

Tariffs have been the talk of Wall Street since President Trump’s inauguration on Jan. 20, 2025.

In April of last year, the president unveiled a sweeping 10% global tariff and introduced higher reciprocal tariffs on dozens of countries deemed to have adverse trade imbalances with America. These reciprocal tariffs were altered, paused, and/or canceled on several occasions before they were struck down by a U.S. Supreme Court ruling in February 2026 that stated the International Emergency Economic Powers Act didn’t authorize them.

Following this ruling, Donald Trump’s administration imposed a new, but temporary (150 days), 10% global tariff, using different policy justifications.

🚨 President Donald J. Trump imposes a 10% global tariff on all countries. pic.twitter.com/42ZGDnMxbR

— The White House (@WhiteHouse) February 20, 2026

The president’s goal with tariffs is to encourage businesses to manufacture goods destined for U.S. markets domestically. These surcharges are also designed to make U.S. products more price-competitive with imported goods.

However, a December 2024 report (“Do Import Tariffs Protect U.S. Firms?”) by four New York Federal Reserve economists writing for Liberty Street Economics showed that Trump’s tariffs can be problematic for businesses and the stock market.

The economists analyzed how the tariffs Trump imposed on China in 2018-2019 impacted businesses and publicly traded companies. They found that businesses impacted by Trump’s China tariffs, on average, experienced declines in employment, labor productivity, sales, and profits from 2019 to 2021.

More importantly, Trump’s input tariffs often dented corporate profits. An input tariff is a duty placed on an imported good (e.g., steel) used to complete the manufacture of a product in the U.S. Input tariffs often raised production costs and made it more challenging for U.S. goods to be price-competitive with imported products.

While Trump’s tariffs don’t have the best track record on Wall Street, something far more nefarious awaits.

Jerome Powell’s last day as Fed chair is May 15. Image source: Official Federal Reserve Photo.

The Federal Reserve is about to enter a new era, and the Trump bull market may pay the price

May 15 will mark the final day of Jerome Powell’s tenure as Fed chair. This end date has been telegraphed for quite some time, with President Trump a vocal critic of Powell and the Federal Open Market Committee (FOMC) since the beginning of his second term. The FOMC is the 12-person body, including Fed Chair Powell, responsible for setting the nation’s monetary policy.

Trump has opined that interest rates should be aggressively lowered to 1% or below. A considerable reduction in lending rates would make it easier to service America’s more than $39 trillion in national debt. Meanwhile, Powell has retorted that the FOMC will rely on economic data, not political opinions, to drive its policy decisions.

On Jan. 30, Donald Trump officially nominated Kevin Warsh to succeed Powell as Fed chair. Warsh previously served on the Board of Governors of the Federal Reserve from Feb. 24, 2006, to March 31, 2011, and was a voting member of the FOMC before, during, and after the financial crisis. On paper, he would bring experience to the position.

But for a historically expensive Trump bull market, Warsh may be the spark that sends the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite over the edge.

“If Trump wants someone easy on inflation, he got the wrong guy in Kevin Warsh.”@AnnaEconomist pic.twitter.com/FGMfeSqHpU

— Daily Chartbook (@dailychartbook) January 31, 2026

If the president was hoping for a dovish replacement to Powell, he may have made the wrong choice with Kevin Warsh. Though all members of the FOMC vow to uphold the dual mandate of maximizing employment and stabilizing prices, Warsh’s voting record over his five years on the FOMC points to clear hawkish tendencies. In other words, Warsh strongly favored higher interest rates during the financial crisis to suppress inflation.

Since the Iran war began on Feb. 28, trailing 12-month (TTM) U.S. inflation has noticeably jumped. Following TTM inflation of 2.4% in February, the U.S. Bureau of Labor Statistics reported a 3.3% TTM inflation rate for March. Meanwhile, the Federal Reserve Bank of Cleveland is forecasting an additional 28-basis-point increase in TTM inflation to 3.58% in April. These figures offer Warsh no incentive to lower interest rates.

Additionally, Kevin Warsh has been hypercritical of the central bank’s bloated balance sheet following the Great Recession. Between August 2008 and March 2022, the Fed’s balance sheet expanded from less than $900 billion to almost $9 trillion. Although this balance sheet has “shrunk” to $6.7 trillion, Warsh would prefer to see the central bank sell these assets down (primarily long-term Treasuries and mortgage-backed securities) and take a passive role in markets.

Kevin Warsh Nomination: one reason why market players are interpreting it as a hawkish pick- I agree-is because of his views on the need for a radical balance sheet reduction.

The $31 trillion-dollar American economy demands liquidity & financing needs that are larger than what… pic.twitter.com/zYunGAItV8

— Joseph Brusuelas (@joebrusuelas) January 30, 2026

But there’s a potential problem for Wall Street. Since bond yields and prices are inversely related, selling these assets would weigh on bond prices and likely send yields higher, thereby increasing borrowing costs. This is a worst-case scenario for a pricey stock market that’s been counting on lowering interest rates to spur AI data center growth and ongoing innovation.

The biggest threat to the Trump bull market isn’t tariffs — it’s Kevin Warsh and a new-era FOMC.