Markets gauge Trump’s pressure amid uncertainty

The author is an editorial writer at the JoongAng Ilbo.
The misery index, calculated by adding inflation and unemployment rates, has long been used to gauge the strain on households. When prices rise and jobs are scarce, hardship intensifies. Recently, however, a new metric has emerged: the so-called Trump Pain Point Index. At first glance, it appears similar in concept, suggesting an attempt to quantify the economic pain experienced by households under U.S. President Donald Trump's policies. In reality, it seeks to measure something else — the level of pressure felt by Trump himself — as markets struggle to interpret his often unpredictable policy decisions.

The index, designed by U.S. research firm BCP Research, combines several variables: inverse returns of the S&P 500, yields on 10-year U.S. Treasurys, the 30-year mortgage rate, gasoline futures prices and one-year consumer price index swaps that reflect inflation expectations. It also incorporates changes in the president's approval rating over the past month. In essence, the index assumes that Trump faces greater pressure when stock prices and approval ratings fall while interest rates, inflation and energy prices rise.
Whether Trump actually feels such pressure remains uncertain. Ahead of the 2024 U.S. presidential election, 233 mental health professionals published an open letter in The New York Times warning that Trump posed a danger due to what they described as severe and untreatable "malignant narcissism." Trump himself has at times made remarks suggesting unpredictability, including saying that he could strike Iran "just for fun." Yet he remains a political figure acutely aware of electoral consequences. A defeat in the November midterm elections would risk an early lame-duck presidency if Republicans were to suffer heavy losses.

This is where market participants see a pattern. When the Trump Pain Point Index rises sharply beyond a certain threshold, analysts say, Trump tends to reverse course — a dynamic sometimes described as "TACO," or "Trump Always Chickens Out." Policy shifts often follow moments of heightened pressure. Deutsche Bank last year developed a similar "pressure index," combining stock performance, interest rates, inflation and approval ratings. Both measures are currently near record highs, suggesting that unexpected policy announcements could emerge at any time.
The existence of such indices reflects a deeper issue: Markets can no longer rely solely on Trump's statements to assess policy direction. This points to an erosion of what economists call credibility capital, a key attribute of effective leadership. A recent report by NH Investment & Securities argued that credible leaders can influence expectations and behavior through declarations alone. Threats prompt action and promises move markets. But once credibility is depleted, it is difficult to restore. Like tolerance to a drug, stronger stimuli are required to achieve the same effect, and when trust is lost, even policy measures fail to deliver results.
The report suggested that the diminishing impact of Trump's repeated rhetoric on tariff negotiations and the war involving Iran illustrates this erosion of credibility. Markets appear increasingly less responsive to his statements, reinforcing the need for alternative indicators to gauge policy direction.
Meanwhile, the conflict between the United States and Iran has entered its second month. The long-feared scenario of Iran disrupting the Strait of Hormuz has begun to demonstrate its potential to shock the global economy. The latest cover story of The Economist was titled "Advantage Iran," reflecting concerns that Tehran, with little left to lose and hardline factions gaining influence, may pursue aggressive strategies that complicate U.S. decision-making. Washington now faces a difficult choice between escalation with uncertain prospects and negotiations that could be seen as a concession.
Even if the conflict were to end immediately,...