Markets had a lot to contend with over the past 12 months: tariffs, White House attacks on the U.S. Federal Reserve, and rising tensions with key trading partners, to name a few. But it seems “peak Trump” may now be over, as the Republican party must find a game plan to win the midterm elections, according to investment management firm PIMCO.
The company’s head of public policy, Libby Cantrill, wrote in a note to clients this week that we have already seen and moved through “‘Peak Trump’—effectively the apex of President Donald Trump’s presidential power.” Cantrill wrote that last year, Trump was “able to impose policies with a compliant Congress and with very little pushback from the Courts (partly due to ideological agreement, but often because the courts are just slow in terms of adjudicating issues).”
However, roadblocks are now beginning to appear: The White House is still waiting on the judgment of the U.S. Supreme Court as to whether Trump’s ‘Liberation Day’ tariffs in April 2025 were legal. A decision has been expected since January. While the White House has made it clear that if the ruling doesn’t come down in its favor, another route would be pursued. The administrative hiccup is nevertheless a drag on one of the White House’s key policies.
Likewise, Trump is also facing a snag around his push for a more dovish Fed. Having nominated former Federal Reserve governor Kevin Warsh, Senate Banking Committee Democrats have now said they’ll refuse to move forward with nomination proceedings unless a Department of Justice investigation into current chairman Jerome Powell is dropped.
On top of that, Trump must navigate the run-up to the midterms later this year. Fiscal stimulus from the One Big Beautiful Bill Act is likely to address ongoing affordability concerns. However, the White House will still be looking to sell positive economic news in the coming months.
Cantrill continued: “In 2026, there may be more constraints on Trump 2.0 by the Congress, both in terms of pushing back on him, as well as forcing him to act. Similarly, we may see more limits imposed on President Trump by the lower courts as well as in some cases, by the Supreme Court. Broadly, President Trump’s flagging approval rating could also mean that he will have less room to maneuver in the court of the public opinion as well.”
According to the latest approval ratings from sources like The Economist, the president’s rating is down 0.3 points since last week: 38% approve of his work, while 56% disapprove and 6% are unsure. His approval ratings by issue show that inflation and affordability have had the most significant drop since the inauguration, followed by jobs and the economy.
That said, markets have fared pretty well over the past year. Despite volatility and some flight to safe-haven assets like gold, the S&P 500 is up nearly 12% over the past year, and the Dow Jones is up by more than 10%. Likewise bond yields have held relatively steady, meaning concerns over the fiscal trajectory of the U.S. is yet to spook investors into any real action.
Not Trump specific
A cycle of waning influence through a presidential term is nothing new, Cantrill acknowledges.
What may be different when it comes to President Trump is that this won’t curtail his plans or rhetoric, which has surprised markets and investors alike over the past year. Cantrill noted that Trump “may be more inclined to push farther, but the political runway to do so will be shorter. Congress will be less willing to accommodate him as they pivot toward their own survival, and the Courts are likely to catch up with the unprecedented pace of Trump 2.0.”
“This may have implications for both the dollar and Treasuries as markets may be reminded that under the U.S. Constitution, no president—even one as historic as President Trump—has unchecked power.”
