Wall Street: the index reacts to Trump’s U-turns and his Achilles’ heel

Trump may soon resort to the carrot approach and make some concessions to his US and/or foreign adversaries. This is predicted by a financial index that calculates the US president’s ‘pain index’ – a threshold beyond which continuing to wield the stick in the Middle East, against China or against his domestic rivals in the Democratic Party could become counterproductive. And now, with a month and a half to go before the mid-term elections, “the Trump Pain Index” – the name given to the indicator developed by the London-based boutique firm JDI Research – is at a high of 10.5 points, the highest value in the entire series, which is derived by analysing five variables: the performance of the S&P 500 index, the yield on the 10-year Treasury, 30-year mortgage rates, one-year inflation expectations and the President’s approval rating. By combining these factors (obviously, the stock market and political consensus are calculated inversely – that is, a fall in either causes the index to rise), a score is obtained that defines the scope for potential aggressiveness in Trump’s policies. A scope that now appears to have been exhausted.

The underlying idea is that the tycoon is prepared to put up with a certain degree of financial volatility and economic strain in order to achieve his political objectives. But not an unlimited degree. When Wall Street corrects, yields rise, mortgages become more expensive, inflation expectations worsen and market consensus shifts simultaneously; a point is reached beyond which the cost of the political strategy begins to outweigh its potential benefits. And that is when the likelihood of a U-turn or a truce increases.

When the index score falls below zero, we enter the so-called ‘Instigation Zone’ – a zone in which financial and political conditions would allow Trump to raise the stakes, such as by threatening new tariffs or opening a military front. Above zero, however, lies the ‘Taco Zone’, an ironic term derived from the acronym ‘Trump always chickens out’. In this range, the president keeps a close eye on the markets and tends to back down when the risk classes present him with the bill. Past events support the methodology behind the ‘Trump pain index’. In April 2025, following increased financial pressure after the announcement of tariffs, a 90-day suspension was suddenly imposed. The same pattern was repeated in early 2026 with the scaling back of threats against Greenland. More recently, following the attacks on Iran, the surge in the index preceded the issuing of the ultimatum and the subsequent ceasefire.

The level of 10.15 reached in recent days therefore suggests that the administration is very close to, if not already beyond, its maximum tolerance point. This does not mean that Trump will make peace with the whole world tomorrow, but that the likelihood is increasing that he will seek ‘wild card solutions’ – a way out that allows him to present a U-turn as a victory: be it a partial agreement, a temporary truce, a last-minute concession, or a new initiative capable of shifting the media agenda. When traditional approaches become too costly, the likelihood of an off-script solution increases.

Of course, the index could well prove wrong in the future, but so far it has served to clearly indicate that Trump can more easily brush aside criticism of his political actions than he can ignore a strong negative reaction from the markets.