For decades, investors have counted on the “Fed put” as a means of putting a floor under the stock market. But with the advent of more aggressive fiscal policy, a different kind of “put” could also come into play in case of market weakness. Described as a “White House put” by market strategist Tom Lee and a “Trump put” by Bank of America’s Michael Hartnett, the concept is that President Donald Trump could use fiscal stimulus as a boost should his tariffs threaten economic growth. “In our view, a White House ‘put’ still exists,” Lee, the head of research at Fundstrat Global Advisors, said in his overnight market note. The “White House wants to avoid Stall Speed in the economy,” he added, “as this raises recession risk, and would require fiscal stimulus … thus, a White House ‘put’ is still in play before [the] economy hits ‘stall speed.'” Recent consumer surveys show the public is getting nervous about the administration’s policies and fears that inflation could reignite. While the inflation concerns aren’t reflected in market-based indicators, moves lower in bond yields are indicating heightened concern about recession risks . First quarter outlook In addition to fiscal measures, Lee also thinks the Federal Reserve could take a dovish turn and indicate a greater inclination toward lowering interest rates to head off an economic slowdown. Data released Friday showing a downturn in consumer spending during January caused the Atlanta Fed’s GDPNow tracker to revise down its first-quarter tracking dramatically to a contraction of 1.5%. “The market is seeing signs that tariffs would further weaken growth and possibly even cause less inflation,” Lee added. “Thus, tariffs might actually force the Fed to become dovish.” Hartnett thinks some intervention from the White House might not take much, with the “1st strike price of [the] Trump put” at 5,783 for the S & P 500, just 1.3% below Thursday’s close. .SPX YTD line S & P 500 year to date That is also where the index stood on Election Day in 2024. “We say this is [the] first strike price of [a] Trump put, below which ‘Stocks Down Under Trump’ headlines begin, below which investors currently long risk would very much expect and need some verbal support for markets from policymakers,” Hartnett said in his weekly “Flow Show” report of where money is going in markets. Unclear support What form that verbal support would take is unclear. Trump said Thursday that 25% tariffs on Canada and Mexico will start Tuesday, the same day that China will be hit with another 10% in charges. The looming tariff prospects have caused uneasiness among investors, with the S & P 500 treading water through a volatile first two months of the year. However, Trump also has signed orders cutting regulations and has promised to reauthorize the 2017 tax cuts he pushed through during his first term in office, both of which would presumably help buoy the economy.
The ‘White House put:’ February’s rough stock market could keep Trump in check
Feb 28, 2025
