How is the Trump Effect Trade Working Out?
What happened to the Trump Effect Trade? It was supposed to be a no brainer with tariffs, tax cuts and less regulation fueling the economy while raising the risk of inflation. In addition, support for the crypto industry was seen boosting the value if Bitcoin and others.
What is the Trump Effect Trade
- Long equities
- Long dollars
- Short bonds
- Long cryptos
.
Long equities: High valuations along with signs of slowing growth have led to a retreat..
Long dollars: Falling bond yields and European stocks outperforming the U.S. have led to more of a two-way risk in a market that started out as a one-way bet based on the still threat of tariffs and a trade war.
Short Bonds: I will pass on why bond yields have plunged other than to say it has been the surprise in the new Trump era.
Long Cryptos: A purely speculative market that has not been able to become a safe haven has seen cryptos fall back sharply.
Truno Eddect Trade Scorecard
| Jan 20, 2025 | Feb 28, 2025 | ||
| S&P500 | 6049 | 5954 | =1.6% |
| NASDAQ | 19756 | 18847 | -4.6% |
| 10 YEAR BOND YIELD | 4.57% | 4.21% | -36bps |
| US DOLLAR INDEX | 1.0806 | 107.51 | =0.5% |
| EURUSD | 1.0429 | 1.0374 | -0,5% |
| USDJPY | 155.50 | 159-58 | -3.7% |
| USDCAD | 1.4304 | 1.4463 | +1.1% |
| USDMXN | 20.61 | 20.53 | -0,4% |
| BITCOIN | 106,157 | 84,210 | -20.7% |
Addendun added March 2, 2205 – BTCUSD lst at 94,000
Crypto prices surged Sunday after President Trump said he would move forward on a U.S. crypto strategic reserve that will include bitcoin and ether, as well as three smaller and riskier tokens.
As this table shows, the Trump Effect Trade has so far not panned out as expected. Three out of the four have been losers (stocks, bonds, cryptos) and one is mixed (dollar).
While the jury is still out as the new administration is only sox weeks old, those who bet on the Trump Effect with a buy (sell) and hold strategy are sucking wind if they have not been margined out. The one area that has not disappointed is volatility caused by headlines generated by President Trump’s tariff talk almost daily.
The Trump Effect Trade, meanwhile, is yet another example of markets initially factoring in the moist extreme outcomes (e.g. trade war, inflation) and then reassessing afterward as illustrated in the scorecard.
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