Former U.S. Treasury Secretary Rubin: Don't be lulled by new stock market highs, a ticking time bomb is counting down in the U.S. economy.

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Former U.S. Treasury Secretary Robert Rubin issues a warning: record highs in the stock market do not mean the economy is healthy. A series of policies by the Trump administration are accumulating deep-seated damage, the consequences of which could be released in a delayed but dramatic fashion.

In a signed article published in the Financial Times, Rubin points out that since the outbreak of the Iran war, the S&P 500 Index has risen more than 7.3%, about 85% of its constituent companies outperformed expectations in the first quarter, and analysts have recently raised earnings forecasts. However, he believes that these surface figures mask serious economic harm being accumulated at the policy level—from worsening fiscal deficits and tariff shocks, to the erosion of the Federal Reserve’s independence and cuts in research funding. These impacts are not yet fully reflected in the short-term data.

Rubin warns that the disconnect between markets and reality can persist for quite some time, followed by a sudden and sharp reaction. He cites the Dow’s 22% one-day plunge in 1987 and the Greek sovereign debt crisis as examples, reminding investors: calm is often followed by an abrupt collapse. He urges the public not to be lulled by a well-performing stock market and apparently robust economic data, because once the market reacts to the damage already done, the cost of correction will be far higher than it is now.

Behind New Stock Market Highs, Policy Damage Has Yet To Be Accounted For

Rubin acknowledges that current market data looks impressive, but he makes it clear that this does not mean that the Trump administration’s policies have not caused serious harm.

He points out the problem of lagging damage. Currently, the market and economy seem to have become “immune” to policy chaos, leading some to conclude that Trump’s policies have not had the serious consequences once expected. Rubin directly counters this: "I do not agree with this assessment. I believe the economy has already suffered substantial damage, whose effects will gradually emerge in the future."

He cites historical cases to illustrate his point: In the 18 months prior to October 1987, the stock market soared despite looming risks, then the Dow Jones plunged 22% in a single day; before the European debt crisis, Greek sovereign bond spreads remained very low compared to other eurozone countries, even as its fiscal and economic problems raised concerns, until the debt suddenly collapsed.

Old Problems Intensified, New Risks Emerging

Rubin divides policy risks into two categories: those that worsen existing problems, and those that create entirely new threats.

For the former, he points directly to fiscal issues: Government should have fixed unhealthy fiscal trajectories, but instead implemented tax cuts funded by trillions in deficits; failed to reform the high-cost and inefficient healthcare system; and, just as AI drove electricity demand up, cut support for affordable alternative energy. He believes these choices will drive up prices, depress growth, and weaken economic resilience.

For the latter, Rubin lists several measures he views as newly-introduced risks: politicizing the Federal Reserve, suppressing universities, drastically cutting federal research funding, targeting undocumented immigrants who play key roles in construction and agriculture, restricting legal immigration, and imposing tariffs that drive up prices and hurt growth. He also criticizes the efficiency agency’s “slash and burn” approach to cuts, calling it seriously damaging to government functions.

“Undoing” Is Difficult To Offset Ongoing Damage

Rubin notes that the market is currently somewhat soothed because extreme policies are often eventually dropped—ceasefire in Iran, the Justice Department dropping its investigation into Fed Chair Powell, and the government accepting the Supreme Court’s ruling that most of its tariffs are illegal.

But he stresses that this consolation mechanism is limited: “Chaos and uncertainty erode the economy over time.” Repeated policy reversals themselves constitute ongoing damage, not harmless repairs.

In his view, the deeper threat is the undermining of America’s international credibility—denigrating NATO allies, seeking ownership over Greenland, launching wars with no clear goal, punishing dissent, and shaking the foundations of the rule of law. “The rule of law is the bedrock of the U.S. economy and an important competitive advantage,” he writes, “and this advantage is being eroded.”

Rubin: America Still the Most Attractive Investment Destination, But Beware Complacency

Rubin clearly states at the end of his article that he does not intend to be pessimistic: "With its vast advantages, the U.S. should remain the world’s most attractive market for investment."

However, he quickly adds: precisely for this reason, investors and the public must be especially wary of being lulled by surface-level prosperity. He points out that by the time the market and economic data truly reflect the harm that has been done, getting the economy back on track will be far more difficult than it is today.

Rubin thus calls on voters to take action—support fair and free elections, support candidates, whether conservative or progressive, who take economic challenges seriously, “including those challenges our own recent policies have created.”

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