The president’s flip-flopping policy has seen a Trump bump turn into a Trump slump, writes TERRY MURDEN
The early market optimism that greeted Donald Trump’s return to the White House, pushing up share prices by more than 4% soon after his election, has evaporated, leaving the stock market lower now than when he was sworn in as president, and even lower than when he was elected.
The rally continued until mid-February, but since then the “Trump bump” has turned into a “Trump slump” with all the gains on the US benchmark S&P 500 index lost as the president plays a game of tariff hokey-cokey with investors and market forecasters.
His tariffs on Canada, Mexico and China have been imposed, reversed and paused, leaving the markets confused and uncertain about where he is leading them.
Economists, too, are unsure which direction to take as their earlier forecasts were based on expectations of Trump tax cuts and deregulation that has now been overshadowed by talk of a global trade war.
Investors are now choosing defensive stocks that do well during downturns rather than in the “Magnificent Seven” tech giants Alphabet, Amazon, Apple, Meta, Tesla, Microsoft and Nvidia which have been the darling of funds and trusts for the past several years.
Mr Trump’s efficiency general Elon Musk has seen his Tesla car company lose $540 billion in value since it hit an all-time high on 18 December. That marks the evaporation of some $540 billion in market value, a 44% slump, though it is still up by about 8% since Election Day.
The market malaise has spread to Europe. The FTSE 100 has just suffered its worst week of the year, while the Stoxx 600 index, which tracks big companies across the UK and EU, has dropped by about 1% this week.
Mr Trump has blamed “globalists” for the market sell-offs that have greeted his trade war against the US’s closest economic partners.
In fairness, some of the downturn has been a result of the wars in Ukraine and Gaza and continuing inflationary pressures.
Talk of rearmament in Europe means governments are preparing to tear up their fiscal plans and Germany is leading a rise in bond yields. The US is still gripped by fear of recession.
Even so, the finger is pointing firmly in the direction of the White House where the flip-flopping policy on tariffs contrasts with Mr Trump’s belief in applying business decisiveness to politics.
The events of the past few weeks have left him looking uncharacteristically vulnerable, but also expose a bullying tendency that adds a layer of tension at a time when the world needs calm and reassurance. All in all, 2025 looks like being a bumpy ride.
Terry Murden was Editor and Business Editor at The Sunday Times Scotland, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business.
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