Three bombs that could crush the Trump rally in the second half of the year

> TL;DR

> - The Dow Jones, S&P 500, and Nasdaq have historically performed well under Trump, but analysts now see serious threats to further gains

> - Global growth could slow to 2.8% in 2026 according to the OECD – and even lower in a negative scenario

> - Geopolitical tensions, persistent inflation, and a growing debt burden represent the three main risks

> - The Fear & Greed Index stands at 22/100, signaling that market nervousness is already elevated

The Trump rally faces headwinds

US equity markets have delivered impressive returns during the periods when Donald Trump has served as president. But according to Nasdaq Markets and a number of leading economists, the positive trend could break down during the second half of 2026 – driven by three distinct and potentially self-reinforcing risk factors.

The Fear & Greed Index currently reads 22 out of 100, indicating that investors are already positioning defensively. Bitcoin is trading around $62,800, a price level that reflects broader risk aversion across markets.

Risk 1: Global growth stagnation squeezes earnings

The first threat is a marked slowdown in the global economy. The OECD projects that global GDP growth could fall from 3.4 percent in 2025 to 2.8 percent in 2026 in a scenario of limited disruption. Should the turmoil persist, growth could drop as low as 2.1 percent – a level that has historically coincided with sharp earnings cuts for US companies with global exposure.

The World Bank's own estimates for global growth in 2026 are set at 2.5 percent, further underscoring that the risk picture is real and broadly recognized among international institutions.

Risk 2: Inflation and energy shocks bite again

The second threat is persistent inflation, partly driven by energy shocks linked to conflicts in the Middle East. The OECD estimates that consumer price growth across G20 countries could rise to 4.0 percent in 2026, up from 3.4 percent in 2025. Morgan Stanley, which published its forecasts in May 2026, notes that "energy supply shocks from the conflict in Iran continue to create uncertainty," even as AI investment and spending by high-income groups support growth.

Higher energy prices directly compress corporate margins and could force the Federal Reserve to keep interest rates higher for longer – running counter to what markets have priced in.

According to the research base, the Fed is expected to hold rates steady throughout 2026, with any cuts coming no earlier than early 2027. That leaves little room for the rate support that has been a key driver of valuation expansion in the US equity market.

Risk 3: Debt, geopolitics, and political turbulence

The third and perhaps most complex risk is the combination of record-high public debt, geopolitical fragmentation, and domestic political instability in the United States.

The World Economic Forum's Global Risks Report 2026 ranks geopolitical confrontation as the most serious global risk over a two-year horizon – a ranking that climbed a full eight places compared to the previous report. The report states that half of the experts surveyed expect a "turbulent or stormy" global trajectory over the next two years.

Adding to this, American midterm voters head to the polls in November 2026. A shift in the political mood could curtail Trump's room to maneuver on the budget and taxes – and trigger renewed turbulence around the debt ceiling, a scenario that has historically produced short-lived but intense market volatility.

Market complacency may be the greatest risk of all

Perhaps the most troubling element is not any single factor, but their combination – what experts call a "polycrisis." SwissBorg's chief investment officer noted as recently as April 2026 that "the world is swimming in debt," and that the underlying tension between a growing debt burden and insufficient earnings growth is "the backdrop for everything happening in markets right now."

US equity valuations remain above historical averages, leaving little margin of safety should any one of the three risks materialize faster than expected.

For Norwegian investors with exposure to global equity markets, it is worth noting that a potential correction in the S&P 500 would typically spill over into the Oslo Stock Exchange and further weaken the krone, given that Norwegian exports of oil and seafood are directly dependent on international demand and energy prices.

The longer the crisis lasts, the greater the economic and social costs – Mathias Cormann, OECD Secretary-General

Sources: Nasdaq Markets, OECD Economic Outlook 2026, World Economic Forum Global Risks Report 2026, Morgan Stanley Global Macro Outlook (May 2026), World Bank, SwissBorg CIO View (April 2026)