The S&P 500 punched through 7,000 to a fresh all-time high. Goldman Sachs posted its second-highest quarterly revenue on record. Morgan Stanley’s equities desk set a record of its own. JPMorgan, Bank of America, and Citigroup all notched records in stock trading.

Wall Street is riding high on the coattails of the war in Iran. But Main Street feels like it’s drowning in it. Much has been written about the K-shaped economy, but there’s something tangibly different about this particular divergence: It’s happening at a time when President Donald Trump and his cabinet are sowing enormous uncertainty and volatility around the war, and isn’t it classic wisdom that Wall Street is allergic to uncertainty? How could a conflict that has shut down one of the world’s most important oil choke points for months and triggered what the International Energy Agency keeps calling the worst energy crisis ever, not hinder the bull run?

While analysts puzzle over the question, many online say they already have the answer: Trump is manipulating the markets. What finance types call “jawboning” looks, to the average person scrolling X, like clear evidence of a president riling markets up over the weekend to create a dip—one that smart money (and Trump-associated insiders, these arguments go) will buy and ride to the top. But one top economist says the answer is simpler than that.

“Stock markets respond to risks shifting around,” said Claudia Sahm, chief economist at New Century Advisors and inventor of the famous Sahm rule for recessions. “Households respond to reality.”

Volatility is the product

Since the post-2008 financial reforms, Wall Street‘s trading desks have been rebuilt around client facilitation. They don’t make money when markets go up; they make money when clients trade. And clients trade when prices move—it doesn’t matter the direction. The Iran war, the oil shock, the Liberation Day whiplash, the Greenland threats, and the Venezuela operation: Each is a reason for an institutional investor to pick up the phone and reposition. Volatility is the product.

That’s how you get a week in which Bank of America’s stock-trading desk posts its highest quarterly revenue in nearly two decades; Morgan Stanley’s equities desk sets a record; Goldman beats estimates; and the five biggest banks collectively are on track for more than $40 billion in first-quarter trading revenue, roughly 13% above last year. 

The consumer has no equivalent machinery. The University of Michigan’s preliminary April consumer sentiment reading came in at 47.6, a 10.7% drop from March and the lowest in the index’s history, worse than the June 2022 trough that Republicans used as a cudgel against Biden for two straight election cycles. The decline cut across age, income, and party. 

And Sahm told Fortune the gloom isn’t just about this spring.

“It’s not just about the last hit to their finances,” she said. “It’s a period of time over the last five years—there’s just been one disruption after another, and it builds up.”

Americans are exhausted from the pandemic, the 2022 inflation surge, tariffs. And now, a war that has pushed gas to a national average of $4.16. While the stock market zooms out to a 12-month horizon, the consumer is stuck in the lived reality of the status quo. 

Who actually owns the rally

It’s also worth asking who, exactly, is long the S&P at 7,000. The wealthiest 10% of American households own roughly 93% of equities. Bank of America’s own research team published a chart this week that drew the K in its starkest terms: Discretionary spending among higher-income households is actually rising, buoyed by tax refunds from last year’s One Big Beautiful Bill Act, while lower-income households are getting squeezed by gas prices they can’t absorb. 

“The gas price shock puts greater strain on discretionary spending by lower-income households,” BofA analyst Shruti Mishra wrote, “since they spend a larger share of their income on gas and save less.”

There’s one word we’ve heard trading desks use to describe consumers through all the inflation hikes: resilient. It is true consumers have miraculously buoyed the economy by spending throughout it all. But that lift isn’t lasting forever. Goldman Sachs cut its 2026 consumption growth forecast from just over 2% to 1.2%, citing the hit to real disposable income from higher gas prices. 

“The consumer is not as resilient as it was back when Russia invaded Ukraine,” Sahm said. “That was a much stronger labor market. Consumer balance sheets were better. That’s just not the case now.”

Which raises another question: If American consumers are running out of road, and the S&P’s forward earnings estimates assume they aren’t, what happens when the two have to meet? “We’re in a place where there’s enough broad-based slowing that I expect this to make a dent in consumer spending,” Sahm said. “That could be a speed bump for the stock market, and that is not my impression of what is baked into the earnings estimates.”

The market manipulation question

And then there is the question that social media is obsessed with: “market manipulation.” Sahm is careful with the term.

“That’s a very specific thing,” she said; it denotes whether or not someone on the inside can time trades based on the information they exclusively have.

“There is a conversation he’s having with markets, and he’s listening to markets,” she said of the president. Trump’s maximalist style—threaten annihilation, then walk it back, then threaten again—has trained investors to buy the dip on the retreat, because the retreat always comes.

“Investors who missed out on the post–Liberation Day recovery because they got scared don’t want to miss out this time,” Sahm said. “As soon as it looked like the worst case was off the table, the stock market was just off and running.”

But Sahm offered one note of caution that runs counter to the rally.

“I kind of worry about the day where markets completely ignore him,” she said, “because then we’re in a place where this has really gone off the road.”