Trump's Presidency and Trade Policies: A Volatile Ride for US Stocks

Donald Trump's presidency and trade policies have significantly influenced the US stock market. While his initial election in 2024 saw a surge in stocks, his subsequent return to office in 2025 brought increased volatility and investor uncertainty, particularly due to his aggressive tariff strategies.

Market Volatility Under Trump's Return

Upon Donald Trump's return to the White House in January 2025, the US stock market experienced a period of heightened volatility. While his 2024 election victory initially propelled stocks to record highs, his renewed focus on tariffs created significant market jitters.

• Initial Surge (November 2024 Election): Following his 2024 election win, the Dow Industrials, S&P 500, and Nasdaq Composite all reached record levels. This surge was driven by investor expectations of lower taxes, deregulation, and a president willing to influence market performance. "Trump trades" such as financials, small-cap companies, and certain tech stocks like Tesla saw significant gains.
• Shift in Focus (January 2025 Inauguration): After his January 2025 inauguration, Trump's administration shifted its focus, with less emphasis on stock market performance and more on bond markets and debt reduction. This change, coupled with aggressive tariff policies, led to investor uncertainty.

The Impact of Trade Policies

Trump's trade policies, particularly the imposition of tariffs, have been a major factor in market fluctuations.

• Tariff Concerns: New 25% tariffs on imports from Mexico and Canada, and a doubling of duties on Chinese goods to 20%, rattled markets. Investors worried about the potential for a recession and the impact on consumer and business confidence.
• Currency and Commodity Reactions:
  • Canadian Dollar and Mexican Peso: These currencies were significantly impacted by tariff threats, experiencing sharp declines.
  • Euro and Sterling: Initially rallied on the absence of immediate tariffs, but relief was short-lived as protectionist concerns resurfaced.
  • US Oil Prices: Fell due to increased US oil and gas production pledges and concerns about global demand, despite potential sanctions on Iranian oil.
• Investor Sentiment: The perception of a "Trump put"—the idea that Trump would intervene to support the stock market—began to fade. Investors questioned whether the administration was willing to accept market downturns to achieve broader economic goals, such as reducing the national debt.

Key Takeaways

• Trump's return to the presidency ushered in an era of volatile markets, largely driven by his unpredictable trade policies.
• The initial market euphoria post-election was tempered by concerns over tariffs and a perceived shift in the administration's focus from stock market performance to debt management.
• Investors are now recalibrating their strategies, recognizing that the "Trump put" may no longer be a reliable market support.

Sources

• Trump's return to the White House: Market winners and losers, Reuters.
• Stocks sink with bond yields as Trump fuels recession fears, Reuters.
• US stock performance on dates of presidential inaugurations, Reuters.
• Stocks surge to record highs as Trump returns to presidency, Reuters.
• Investors question 'Trump put' as tariffs rattle stock markets, Reuters.