Is This The End of The Trump Trade?

Since the November US election, global equities have broadly rallied, with the S&P and Dow Jones Industrial Average hitting record levels in the process. Dubbed the Trump Trade, heading into 2017 it seemed all one had to do was buy US equities and then sit back and watch the dollars pile in.

However, it seems only 10 days into his presidency, Trump has given long equites traders some pause for thought with his executive order banning entry to the US from 7 majority Muslim nations.

 

eMini S&P Price Action January 2017
eMini S&P Price Action January 2017

Source: tradingview.com

From the above chart, we can see just how much markets have priced in the impact of fiscal stimulus under the Trump regime with the S&P rising over 100 points since November 8 2016. However, this has all been based on the assumption that the President should be taken seriously, but not literally.

However there is growing concern that this could only be the beginning of a more isolationist approach to policy.

So far the majority of the impact seems to be limited to business with exposure to the effected countries, or large migrant workforces – airlines and technology being the so far the worst affected. Monday saw shares in Alphabet Inc trading lower by 2.48% and American Airlines down 5.64%.

But there is still a large question as to where markets go from here. As the recent moves suggest that any increase in isolationism could undo the perceived benefits of decreased regulation and fiscal spending.

Equities markets still have some way to fall before the Trump Trade can technically be called done, but it does seem like reality is now beginning to check the rampant euphoria of post-election markets.  With the S&P seemingly happy to range and await further direction from the Commander In Chief.

 

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