Will President Trump Crash the Stock Market? History Says This Could Come Next.

Brent crude is up 72% year to date as conflict-related disruptions threaten the Strait of Hormuz, which handles about 25% of global maritime oil shipments, and the Bab al-Mandeb, which handles roughly 11%. The article warns that higher inflation, a 25bp Fed rate hike to 3.75%-4.00%, and a 4.94% 10-year Treasury yield could pressure AI-led equity valuations as companies plan more than $1 trillion in AI spending this year. Despite the S&P 500 gaining 17.9% in 2025, the near-41 CAPE ratio and expanding geopolitical and tariff risks raise the prospect of a correction and favor a rotation from richly valued growth stocks toward value.

Analysis

The relevant transmission is not headline inflation but the discount-rate/capex collision: AMZN, MSFT and META can fund infrastructure internally, yet their incremental AI return thresholds rise as long-dated yields and power costs move higher. Near term, NVDA remains protected by backlog and supply allocation; the more vulnerable leg is the second derivative of spending—networking, data-center construction and unproven software valuations—if hyperscalers begin emphasizing return on invested capital rather than capacity.

Over the next 1-3 months, a persistent rise in real yields should produce a factor rotation rather than an indiscriminate equity selloff. Energy cash flows and certain defensives can absorb the macro shock, while long-duration technology multiples compress even if earnings estimates initially hold. GS is a mixed beneficiary: trading/restructuring revenues improve with volatility, but a sustained growth slowdown would ultimately weaken underwriting and credit performance.

The contrarian point is that an AI unwind is not the base case merely because valuations are elevated. The critical falsifier is a reduction in hyperscaler capex guidance or evidence that GPU deployment is shifting from supply-constrained to demand-constrained; absent that, selling NVDA solely on macro valuation arguments risks fighting the strongest earnings revision cycle. Conversely, a 10-year yield remaining above roughly 5% through the next earnings cycle would make current mega-cap terminal-value assumptions increasingly difficult to defend.

Key Decisions for Investors

• Initiate a 1-3 month relative-value hedge: long XLE versus short QQQ, sized beta-neutral. The trade captures commodity-linked cash-flow resilience against duration-sensitive multiple compression; exit if the 10-year yield falls below 4.5% or Brent reverses sharply on a verified supply normalization.
• Keep NVDA as the preferred AI exposure but hedge with short SMH or puts on a high-multiple software basket rather than reducing NVDA outright. Reassess immediately on any AMZN, MSFT or META capex-guide cut; that is the signal that would convert a valuation concern into an earnings risk.
• Avoid adding to AMZN, MSFT and META ahead of the next reporting cycle unless management quantifies AI monetization or maintains capex-return targets. A 10-15% relative underperformance versus XLE is plausible if yields remain elevated, while downside is limited if long rates retreat rapidly.
• Use GS as a tactical volatility beneficiary only, not a structural inflation hedge. Long GS versus a regional-bank ETF for 1-3 months is attractive if market volatility and issuance activity rise; close if credit spreads widen materially, which would shift the balance toward loan-loss risk.