The ‘Trump Trade’ is turning into a loser in the stock market

When Donald Trump was elected to a second term as president, amateur and professional traders alike rushed to identify which stocks would benefit from his aggressive economic policies.

While that strategy got off to a promising start, the so-called Trump Trade is now in tatters. Ned Davis Research’s Trump Trade Index — which consists of a dozen exchange-traded funds expected to benefit from White House policies on homebuilding, defense spending and the re-shoring of manufacturing — has slumped about 16% since May after clobbering the S&P 500 Index at the beginning of the year. Several of the ETFs in the gauge are now trading lower for the year. 

The breakdown in the Trump Trade is mostly a result of the US conflict with Iran, which has pushed up energy prices, inflation expectations, interest rates and the value of the US dollar, Ned Davis Research wrote in a report this week. 

“All this is tied to the Iran war and inflation,” said Pat Tschosik, chief thematic strategist at Ned Davis Research. “Let’s just go three months without some sort of inflation shock, right? Between some sort of tariff, or war, or supply chain disruption, could we just go three months without some ...