8.3 Trillion Reasons the Trump Bull Market Is Running on Borrowed Time
Although the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) typically rise under most presidents, their annualized returns with President Donald Trump in the White House have been well above average. The rise of artificial intelligence (AI), coupled with Trump's favorable corporate income tax policies, has fueled growth on Wall Street.
But the Trump bull market appears to be running on borrowed time. While a laundry list of headwinds exists on Wall Street, including historically pricey valuations and record margin debt, it's a quarterly reported economic data point that strongly suggests a course correction is coming.
However, the latest money market fund data follows a worrisome trend.
During the first quarter of 2026, total financial assets held in money market funds ballooned to an all-time high of $8.29 trillion. Even though we'd have expected capital to flow out of money market funds when the Federal Open Market Committee (FOMC) began cutting interest rates in September 2024, inflows never slowed. Despite yields on fixed-income assets declining, investors have continued to pile in -- and that's a big-time worry.
History offers investors little reassurance about the evolution of AI. While empowering software and systems with the tools to make autonomous, split-second decisions is a multitrillion-dollar opportunity, history shows that every game-changing technology has taken several years to mature. This lengthy pace of optimization, which investors always seem to overshoot, leads to the bursting of bubbles with next-big-thing technologies.
Historical precedent points to valuations also being unsustainable. The S&P 500's Shiller Price-to-Earnings (P/E) Ratio, also known as the Cyclically Adjusted P/E Ratio (CAPE Ratio), nearly tipped the scales at 43 in early June. It's the second-priciest valuation multiple since January 1871
Pucker time/rev II
The Stock Market Is Doing Something Observed Only 6 Times Since 1871 --
and the Previous 5 Occurrences Ended in Disaster for Wall Street
History can be a powerful teaching tool, with past events on Wall Street having the uncanny ability of foreshadowing the future.
Most investors rely on the time-tested price-to-earnings (P/E) ratio when valuing public companies or the broader market. Although the P/E ratio works great for quickly evaluating mature businesses, it's easily tripped up by recessions, which can turn earnings per share (EPS) negative.
The valuation tool that's demonstrated it can provide apples-to-apples valuation comparisons spanning more than a century, and isn't disrupted by recessions since it takes trailing 10-year EPS into account, is the S&P 500's Shiller P/E Ratio. You'll also see the Shiller P/E referred to as the Cyclically Adjusted P/E Ratio, or CAPE Ratio.
Despite being introduced by economists less than 40 years ago, the Shiller P/E Ratio has been backtested to January 1871. Over this 155-year and nearly seven-month period, it's averaged a multiple of 17.4. But as of the closing bell on July 27, the S&P 500's Shiller P/E Ratio was nearly 40.5.
8.3 applies.
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