Wall Street is getting cut out of Trump 2.0

Lately, on Twitter/X/whatever you want to call it these days, there’s been a noticeable uptick in nostalgia for Steven Mnuchin, the treasury secretary during President Donald Trump’s first term.

“Come back Steve Mnuchin I miss you Steve Mnuchin,” one user wrote in early March. “Steve Mnuchin was the best Trump 1 cabinet member. It almost makes up for suicide squad,” wrote another. “Mnuchin was probably the most competent cabinet appointment of the last 3 administrations and I’m not sure it’s particularly close,” wrote another. “Mnuchin didn’t do anything mental and now he’s viewed with nostalgia,” wrote another.

Mnuchin’s four years in the administration were busy: He shepherded through the tax cut bill in 2017, warning before the legislation’s passage that stocks would crash if it didn’t get the go-ahead. When COVID-19 swept in, he was instrumental in striking a deal with Congress to deliver economic relief. Throughout his tenure, he kept everybody calm about the debt ceiling. On a lighter note, he and his super-beautiful wife, Louise Linton, posed for photos with the sheet of dollar bills that got them compared to James Bond villains — an outrage that seems quaint in this day and age.

In Trump 1.0, the New York City-born financier served as a sort of Wall Street whisperer in the White House. Mnuchin was the guy who reassured markets everything was going to be all right. He was one of the adults in the room, a serious person whose presence emanated seriously good outcomes, business-wise. (He’s so serious, in fact, that he’s always Steven, never Steve, and will correct people if they screw it up.)

With the markets currently in meltdown mode, largely thanks to Trump, Mnuchin (or a Mnuchin type) is someone many on Wall Street would very much like to have back. They’d like a Mnuchin-esque Money Dad to come tuck them in at night and tell them not to worry about big bad tariffs or a potential recession hiding underneath the bed. In the absence of such a figure, investors are facing a Trump 2.0 who isn’t as concerned about their feelings — or, more importantly, holdings — as they’d hoped. He’s listening to Silicon Valley a lot more than he is Wall Street, to the extent he’s listening to anyone. Sure, Trump’s got a new Wall Street-attached treasury secretary, hedge funder Scott Bessent, but investors are still figuring out how to measure him. He just defended tariffs by saying cheap goods aren’t part of the American dream. In the internet’s collective imagination, Steven Mnuchin would never.

Wall Street’s approach to Trump has long had an element of wishful thinking to it. Yes, the president likes to tell people their stocks are going to go up, and of course, the Republican Party’s bent toward low taxes and deregulation is something the business community favors. But the thing about Trump is that he says and believes a lot of things, and not all of his ideas are music to investors’ ears, especially lately.

The Trump administration’s order of operations this time around may not be so favorable to the stock market or economy in the short term. He’s focused on tariffs and has been announcing, delaying, and reinstating them at a breakneck pace. When he was elected, many observers believed tariffs were largely going to be a negotiation tactic. Six weeks into his presidency, it’s becoming clear he means business, even if the exact details of said business remain TBD.

“We’re in a different environment in Trump 2 than Trump 1, and I think one of the differences is that there’s more broad agreement on the use of protectionist policies, even by the so-called Wall Street voices,” Josh Lipsky, the senior director of the Atlantic Council’s GeoEconomics Center, said. “In the first administration, they didn’t even start talking about tariffs seriously until a year in.”

As markets have started to flash warning signs about the tariff whiplash, the Trump administration’s response has been a bit of a shrug. In his address to a joint session of Congress last week, the president acknowledged tariffs would cause a “little disturbance” but said, “We’re OK with that.” In a subsequent interview with Fox News, he wouldn’t close the door on a possible recession, saying, “I hate to predict things like that.” Bessent recently told CNBC that maybe the economy is “starting to roll a little bit” and predicted a “detox period” as the government slows its spending. After Trump’s recession hedge, Commerce Secretary Howard Lutnick said there won’t be a recession in America — but Lutnick’s also been tasked with trying to explain the daily flip-flops on tariffs, which seems to have undercut Wall Street’s faith in his pronouncements.

Besides tariffs, Trump is looking to move fast on immigration and deportations, another check in the negative column for many businesses. The same goes for the chaos DOGE is creating. Oh, and did I mention there’s perhaps a government shutdown on the horizon?

“What’s happening now is you’ve got animal spirits meeting up with the realities of policy on the ground,” Gregory Faranello, the head of US rates trading and strategy for AmeriVet Securities, said. “If you look at the total pool and bucket of everything that’s going on right now, it’s uncertainty.”

The uncertainty probably won’t last forever, but right now, it’s got a lot of people on edge. The S&P 500 is down by 5% since the start of the year, and the Dow by 3%. Many smart people did not expect to be in “don’t-look-at-your-401(k)” territory this early in Trump’s second term, if at all.

“Capricious policies are likely to freeze any kind of capital investment or business activity,” said Jack Ablin, the chief investment officer and founding partner of Cresset Capital. “And that’s problematic in an economy that appears to be slowing.”

It’s not necessarily the case that Trump 2.0 doesn’t care at all about Wall Street; he just seems to care about a lot of other things more. The White House contends that while tariffs, for example, might be a pain in the near term, they’re necessary to revamp the economy over the long haul.

Trump 2.0 is “much more holistic on what they’re looking at to define success,” Keith Lerner, chief market strategist at Truist Wealth, said. Bessent seems quite focused on the bond market and 10-year Treasurys, specifically, believing lower bond yields might help boost the housing market. He has characterized tariffs as a “one-time price adjustment” and brushed off concerns about inflation in his defense of the administration’s trade strategy.

“I guess the question is, OK, holistically, you have a 7% decline in the stock market. From their perspective, that may be OK relative to these other things which are priorities for them and will make the US economy more competitive,” Lerner said. “The question that no one knows is what’s the pain threshold?”

The assumption has long been that the markets would check Trump’s worst impulses (or a Mnuchin-like figure who would hammer home what’s going on in the markets). Right now, the checkpoint isn’t clear. Bessent seems to be aligned with the president’s protectionist stance, and Wall Street doesn’t find him to be a particularly soothing force.

“The Street is not comfortable yet with Bessent and Lutnick, and that’s been an overhang and issue for the markets in the near term,” Dan Ives, an analyst at Wedbush Securities, said in an email.

After the stock market’s meltdown on Monday, the White House released a statement from an unnamed official arguing that Wall Street fears aren’t necessarily reflective of what’s happening in the real economy. “Want to emphasize that we’re seeing a strong divergence between animal spirits of the stock market and what we’re actually seeing unfold from businesses and business leaders, and the latter is obviously more meaningful than the former on what’s in store for the economy in the medium to long term,” the official said.

But many businesses are not having a good time trying to decipher all the policy uncertainty. The problem with opening the door to a small recession or adjustment period is that once a downturn has begun, there’s no control over what happens.

“Recessions are their own beasts,” Kevin Gordon, a senior investment strategist at Charles Schwab, said. “They could take on a pretty strong position in terms of changing the trajectory of the economy. So it’s certainly something I’d say be careful what you wish for.”

Despite the upheaval, Wall Street still has things to be excited about in the Trump administration — but the sugar high is wearing off a bit, and some less favorable realities are setting in.

For one thing, some of the thrilling stuff the administration is expected to deliver is not that thrilling — namely, the tax bill. Many of the provisions in Trump’s 2017 tax bill are set to expire this year. Trump and the GOP-led Congress are highly likely to pass a new bill to extend most of them. For corporations and individuals, the extension is good in the sense that their tax bills won’t go up. But it’s not as great as it was in 2017 when they got a massive new cut. Keeping the 2017 law is “just extending the status quo,” Gordon said, “so there is no additional stimulus that comes from that.” It’s kind of like buying a second pair of the same pants you like because they fit well and are durable — they’re nice to have, but they don’t deliver the same little burst of endorphins you got when you discovered the first pair. And the tax cut legislation is still months away. In the meantime, investors are being hit with daily headlines about all the less-business-friendly stuff Trump wants to do. It’s like having to pay a bunch of medical bills while waiting for that pair of pants to get delivered.

“I think the sequencing is definitely important,” Gordon said. “You’re front-loading all of the tariffs and immigration risks this time, and you don’t necessarily get the added juice from the fiscal side. I would argue you get none of it.”

This belated Mnuchin mania is the manifestation of broader anxieties about the Trump administration and a recognition that this time really is different. Trump is moving faster and breaking things quicker. He feels like he has a mandate. He’s bringing more true believers with him. Remember that supposed “committee to save America” of people surrounding Trump to rein him in back in 2017? They are not invited to the party this time.

“Scott Bessent has Wall Street experience, but he doesn’t seem particularly comfortable in how he talks about what it is that the administration’s trying to achieve. What is the nonpartisan basis for it? What is the sort of substantive case?” said Skanda Amarnath, the executive director of Employ America, an economic advocacy group. “Everyone who’s currently picked is really indexing even further on loyalty, but that does come at the expense of being credible in an economic markets context.”

To be sure, there’s some rose-colored glasses stuff going on with the way many people think of Trump 1.0, at least money-wise. The S&P 500 was up for most of his first term, but it wasn’t a smooth ride; the index ended 2018 down by 6.24%. The US had a mild manufacturing recession in 2019. Many people in Trump’s first administration were just as loyal to the president as those in the second administration. And ultimately, he was always the one in charge. It’s not like Steven Mnuchin or Gary Cohn or Rex Tillerson were running around willy-nilly doing whatever to make sure the Dow was up for the day.

Like everyone in human history, Mnuchin’s record is mixed (and would get vastly different scores, depending on who you ask). He reportedly pushed for Trump to select Jerome Powell for Federal Reserve chair, whom many in finance and economics would agree was a sound choice. When the economy spiraled because of the pandemic, he was a key negotiator in getting legislative support across the finish line. He also advocated for a tax bill that added to the deficit and disproportionately benefited corporations and the wealthy. And you have to admit that posing with the sheet of dollars was a little gauche, even if anyone in their right mind would have done the same thing.

“He was pragmatic,” Amarnath said. “He also had a certain credibility with the markets and political actors on the other side of the aisle”

The good news, all you Mnuchin heads, is he may be gone, but not forgotten. Back in November, he told Reuters that while he wasn’t planning on joining the new Trump administration, he’s “happy to advise from the outside.” So, Steven, maybe call Scott.

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.

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