Trump’s worst nightmare is a threat to markets

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It cannot be repeated often enough, but the stock market is not the economy. Nonetheless, the current disconnect between Wall Street and Main Street is something to be believed.

Judging by the performance of the S&P 500, you’d expect the US and wider world economies to be booming. It is true that they are not yet in recession, nor do most observers expect them to be in the immediate future.

Indeed, on some measures, the US economy is still flying. Recent GDP data suggest annualised growth of 2 per cent, sustained by the rocket fuel of escalating data centre capital spending. The jobs market also looks surprisingly resilient.

But beneath the surface, all is not as it should be. The closely watched University of Michigan’s Consumer Sentiment Index for the US plunged to a record low of 44.8 in May 2026, marking the third straight monthly decline on the back of much higher gasoline prices.

It’s a similar, if not quite as dramatic, story from The Conference Board, which finds consumer confidence to be almost as bad as it was at the height of the pandemic six years ago.

Oil traders are too optimistic about a Trump ‘victory’ in Iran

Stephen BartholomeuszSenior business columnist

Senior business columnist

Pity Kevin Warsh, newly sworn in as chairman of the US Federal Reserve. He’s expected by Donald Trump to preside over a series of interest rate cuts in the run-up to November’s midterm congressional elections, but he is faced with an economy where inflation is rising strongly, and growth is sustained only by the candy floss of an AI spending boom.

Warsh is very much a believer in the power of AI to deliver a transformational leap in productivity and, therefore, a whole new era of strong, non-inflationary........

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