The Mandate Evaporates
The honeymoon is dead. Political capital is a finite resource, and the current administration has spent it with reckless abandon. One year ago, the second term began with a modest but functional net approval rating of +2 percent. Today, that figure has plummeted to -19 percent. This is a 21-point erosion in 365 days. It represents one of the fastest sentiment collapses in modern polling history. The markets are no longer pricing in the promise of deregulation. They are pricing in the reality of friction.
The Tariff Inflation Feedback Loop
The mechanism of this decline is rooted in the wallet. Aggressive trade postures were marketed as a tool for industrial rebirth. The data suggests a different outcome. As of late 2025, the implementation of universal baseline tariffs has acted as a regressive consumption tax. Importers have not absorbed the costs. They have passed them directly to the American consumer. This has stalled the disinflationary trend that defined the previous two years. Per recent Bloomberg market data, core inflation has remained stubbornly above the 4 percent mark, forcing the Federal Reserve to maintain a restrictive stance longer than anticipated.
Consumer sentiment is a lagging indicator of economic reality. When the cost of durable goods rises alongside borrowing costs, the middle class feels the squeeze. The administration’s focus on reciprocal trade has created a secondary effect: supply chain paralysis. Manufacturers, uncertain of the next executive order, have frozen capital expenditures. This is not the ‘animal spirits’ the equity markets expected in late 2024. It is a defensive crouch.
The Efficiency Paradox
The Department of Government Efficiency was designed to trim the fat. In practice, it has created a localized recession in the D.C. metro area and a broader sense of institutional instability. Radical budget slashing has a multiplier effect. When federal contracts are frozen and the civil service is gutted, the velocity of money slows. The latest Reuters reports indicate that federal procurement delays have shaved 0.4 percent off the quarterly GDP growth. This is the cost of rapid institutional deconstruction.
Investors hate uncertainty. The initial rally following the 2024 election was built on the hope of a corporate tax cut extension and a lighter regulatory touch. However, the volatility introduced by mass deportation rhetoric and threats to central bank independence has neutralized those gains. The S&P 500, which surged in early 2025, has spent the last six months in a sideways grind, failing to break new highs as the risk premium rises.
Visualizing the Sentiment Decay
The following data represents the trajectory of net approval from the inauguration to the present day, reflecting the cumulative impact of these economic pressures.
One Year Erosion: Trump Net Approval Rating Trajectory
The Divergence of Expectations
The table below highlights the disconnect between the administration’s stated goals and the current economic indicators as of January 24.
| Metric | January 2025 | January 2026 | Change |
|---|---|---|---|
| Net Approval Rating | +2% | -19% | -21 pts |
| Inflation (CPI YoY) | 3.1% | 4.6% | +1.5% |
| 10-Year Treasury Yield | 4.25% | 5.15% | +90 bps |
| Consumer Confidence Index | 108.2 | 91.4 | -15.5% |
Institutional Friction and the Fed
The most dangerous front is the war on the Federal Reserve. Public criticism of the FOMC has historically led to a ‘credibility tax’ on U.S. debt. We are seeing this manifest in the term premium. Bond vigilantes are back. They are demanding higher yields to compensate for the risk of a politicized dollar. If the administration continues to challenge the independence of the central bank, the -19 percent approval rating will be the least of their concerns. A genuine debt crisis would be the inevitable result.
The Securities and Exchange Commission has also seen a shift in enforcement priorities, moving away from traditional oversight toward a more laissez-faire approach. While this was expected to lower compliance costs, it has instead led to a rise in speculative bubbles in unregulated sectors. The lack of clear guardrails is scaring off institutional capital that requires a predictable legal environment. Capital is cowardly. It flees where the rules of the game are subject to the whims of a single individual.
The Path Forward
The administration is at a crossroads. They can double down on the disruptive tactics that fueled the 21-point drop, or they can pivot toward a more conventional fiscal policy. History suggests the former is more likely. The next major hurdle is the March 2026 debt ceiling deadline. With approval ratings in the basement, the administration’s leverage with a fractured Congress is at an all-time low. Watch the 10-year Treasury yield. If it crosses the 5.5 percent threshold before the spring equinox, the political crisis will transform into a systemic financial one.
