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Your guide to what the 2024 US election means for Washington and the world
Donald Trump has gone awfully quiet about the stock market. In the early stages of his first term in office, it was one of his favourite topics of conversation on social media, and who can blame him? The benchmark S&P 500 index of US stocks climbed by 13 per cent from election day in 2016 to the end of the following February and rounded out the year with a smooth 20 per cent rise.
This time around, it is somewhat different. US markets are up by a more sedate 2.5 per cent over the same timeframe, down hard from post-election highs, while markets in Europe have ripped higher and even China is starting to shake off its on-and-off “uninvestable” label.
JPMorgan points out that in his first term in office, the president tweeted favourably about the stock market’s performance 156 times. Since 2024, his social media platform of choice has changed, but so has this topics: he has posted about it just once.
“During his first mandate, President Trump was continuously posting on positive US economic developments in a large sense, with dozens of tweets about lower unemployment, higher stock market or the creation of a new factory in a specific state for instance,” the bank wrote. “This aspect has disappeared, as most of the current posts regarding the ‘US economy’ are on debt ceiling, government spending/efficiency or tariff benefits.”
The second-term president clearly has time to bump up the tally of social media posts, having been in office for a little over a month. But the contrast with the start of the first term is striking. It reflects an increasingly clear pattern, which is that pretty much all the so-called Trump trades have now petered out. The mood in markets has darkened over the past week or so and the all-important narrative has soured. The nebulous market force of vibes, mood and narrative shouldn’t matter — but it does.
A few weeks ago, Trump’s beloved import taxes were viewed as inflationary, and even as a marginal source of growth for domestic manufacturing. Now, a new narrative has taken hold — that they are likely to damage the economy and that some of the early inflationary forces were down to US importers front-loading purchases to avoid painful price hikes. Efforts to cut federal spending have been seen as a helpful dose of fiscal rectitude. Now they appear to risk sapping the fuel away from the economy.
Short-term US data releases are also not helping the mood. Retail sales recently posted their biggest decline in nearly two years. Consumer confidence has fallen by the largest degree in four years. The rise in optimism among small businesses also appears to have peaked. Blaming all this on cold winter weather will get you only so far.
Citi’s economic surprise index shows that US data releases keep on missing Wall Street forecasts, while Europe keeps on beating them. It’s not all bad for the US. “We remain bullish on the economic outlook,” wrote Torsten Slok at Apollo this week. “But we are very carefully watching the incoming data for signs if this is an inflection point for the business cycle.”
The most popular trades centred around the new president are now clearly in trouble. “You are seeing the unwinding of the Trump trades,” said Jimmy Chang, chief investment officer at the Rockefeller Global Family Office. “The initial reaction after the election was that Trump means America first: higher growth, higher inflation, higher interest rates and a stronger dollar.”
All of those convictions are crumbling. For good measure, add bitcoin to the list. It has dropped 26 per cent from its January high. Stocks have fallen by a substantial 4.5 per cent from the highest point of this month — from a high base, granted, but the contrast with a rare bright spot in European markets is stark.
Jim Caron at Morgan Stanley Investment Management said he had been making the case for somewhat higher allocations to Europe since the start of this year, though even in Europe he has often been “laughed off” as an “optimistic American”. “What I find about this trade is that a lot of people hate it,” he said — a decent indication that more buyers are yet to arrive.
In the US, it is telling that one of the biggest decliners among big listed companies is electric vehicle maker Tesla — the highest-profile commercial venture of billionaire-turned-presidential-adviser Elon Musk. Tesla sales are declining rapidly, especially in Europe. This might be partly due to increased competition but also a consumer backlash against Musk’s aggressive cost-cutting measures for the US government and unnerving political interventions. Its shares have dropped a hefty 40 per cent since mid-December.
One Trump trade is still motoring along just fine, however: the rouble. The Russian currency has climbed nearly 30 per cent this year against the dollar, with little sign of a pullback. Make Russia Great Again, I guess.
For US markets, to a large extent, investors are pulling off their favourite trick: looking at precisely the same information as before, and coming to a whole new conclusion about it. Sentiment is a fickle thing. But this feels like the week the Trump trades went on life support. The president might find it tough to talk them back up again.
katie.martin@ft.com