Last week, the S&P 500, Dow, and Nasdaq all hit record highs. Bitcoin, which is simply betting on what other Bitcoin investors think the fake currency is worth, traded for more than $100,000, more than double its value in February.
By almost any measure, the market is overvalued, and we should see a major correction, if not a deep collapse, under President Trump’s watch. The only question is whether today is more like the spring of 1928, when the upswing continues, or the fall of 1929, when the crash comes over the next hill.
The broad market price-to-earnings ratio for publicly traded companies (Russell 2000) is now about 36 percent, higher than it was in October 1929. Corporate profits are also at an all-time high. Those who think corporate profits, and therefore stock prices, can rise will give even more praise to President Trump’s policies of deregulation and tax cuts. In the relatively short term, they may be right.
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However, President Trump has also decided to raise tariffs, which would raise the cost of raw materials as well as consumer goods, potentially slowing GDP growth. His tax cut program will certainly increase the budget deficit. This deficit, in turn, is likely to scare the Federal Reserve.
Nothing is more certain to destroy an inflated stock market than raising interest rates. President Trump’s intermittent badmouthing of Federal Reserve Chairman Jay Powell, whose term ends in May 2026, is not due to retaliation, but because Chairman Powell does not trust President Trump’s economic policies. An instinct that only increases the chances of raining on the parade.
Even without these failures, the value of the stock market cannot continue to rise forever several times faster than the economy. Warren Buffett, an investment expert, has moved his $325 billion fortune from stocks to cash.
The entire history of financial capitalism is a history of bubbles and crashes. There is euphoria during the rally, which collapses when investors sense a shift in the market and the crowd decides to sell en masse.
At least stocks are in real companies. The crypto craze will further exacerbate this boom-and-bust pattern, as these currencies are being built in the air. The total value of the cryptocurrency market is just under $4 trillion. Bitcoin prices plummeted by about 75% in 2022 when the Federal Reserve tightened monetary policy.
Stock ownership is highly concentrated. But just like in 1929, a stock market crash has negative effects on the entire economy. people lose their jobs.
The market rally may continue for a while, but unless there is a big break before the 2026 midterm elections, it will defy gravity. Despite Trump’s dictatorial fantasies, even he cannot order stock prices to rise.
A second Trump administration will solidify a right-wing majority on the Supreme Court for a generation, placing our collective future in the hands of a man virtually unchecked by our institutions. The country is moving to the right, and the repercussions will likely continue for decades to come. In a situation like this, a robust independent media ecosystem will be more important than ever. We bring you the latest news about how President Trump’s policies actually affect the American people, shine a light on stories that the corporate media misses, and show you how power in this country really is. We are committed to keeping the public informed about how things are working.
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