The Four Stages of the Trump Trade

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Transcript

00:00What is the Trump trade? I'd say there have been at least four over the last year or so.

00:05First, from the debate through to sometime around about January, there was election euphoria.

00:12People were working on the assumption that Trump was going to do all the things the market liked,

00:17like deregulation and cut taxes, and not do any of the things it didn't like,

00:22like raise tariffs, clamp down on migration.

00:25The fact that he had very anxiously tried to keep the market high during his first term,

00:32the fact that he had backed down from doing anything too aggressive,

00:36and the fact that this time he was actually friends with all the big titans in Silicon Valley

00:40were all taken as reasons why this was going to be fantastic for the markets.

00:45Then, starting around about January or February, until the Liberation Day tariffs,

00:51that went completely into reverse. Trump was prepared to say that he didn't mind if markets

00:58actually went down because they had years of injustices to unwind. He threatened to fire

01:05Jay Powell from the Fed, and of course, he levied massive tariffs, far higher than anybody had

01:12expected on the rest of the world. Then you get the third stage known as the taco. Trump always

01:18chickens out. He chickened out over tariffs, or so it seemed at the time, having a long delay

01:24while he renegotiated on them. He announced that he was going to keep Jay Powell at the Fed.

01:31After all, markets recovered very nicely indeed. He'll huff and he'll puff, but he won't blow your

01:38house down. You'll be fine. What is strange is the fourth phase in the Trump trade, which starts

01:45around about the end of July when the pause on tariffs ends. And actually, Trump doesn't chicken

01:53out. The tariffs on most of the countries around the world are just as high as he said they were

01:58going to be on Liberation Day. Indeed, they're higher on Brazil and India, two of the most important

02:04countries out there. He didn't fire Jay Powell, but he's still trying very hard to fire Lisa Cook,

02:10another Fed governor in a measure that really would have a big impact on the independence of

02:16the Fed. The markets aren't quite sure what to make of it. They've rallied very nicely because

02:21there are other things going on that are very positive, like AI. Every so often when there's

02:26some really worrying sign, such as Trump saying that he's going to put 100% tariffs extra on China

02:33in the rare earth dispute, you get quite a sharp sell off. We still don't actually know if Trump

02:41always chickens out. And we don't yet know exactly what the final shape of this Trump trade is going

02:49to be. You can get all the details on how to get my free daily newsletter on global markets at the link

02:57in Bayern.