- The Trump trade that boosted markets at the end of last year is faltering in 2025.
- Moves in stocks, bond yields, and the dollar have either stalled or gone the opposite way markets expected.
- Flip-flopping messaging on tariffs has shifted views on the direction of rates and inflation.
The so-called Trump trade the boosted markets at the end of last year has floundered so far in 2025.
Investor bets for a second Trump presidency were rooted in assumptions that stocks would soar on lower taxes and regulation, and that rates and inflation would creep up as tariffs led to higher costs for consumers. The dollar, meanwhile, would see continued gains on the back of higher-for-longer interest rates.
Investors are instead dealing with whiplash amid the president’s back-and-forth approach to issues like trade policy, which has led to a weaker-than-expected stock market. Those traders have been stuck in a state of uncertainty, wondering if the latest newly-floated proposal could be rendered moot in a matter of minutes.
Even after a surprisingly hot January inflation report pushed yields and the dollar higher, they are still down to flat on the year, showing a faltering Trump trade.
Detailed below are three popular Trump-linked bets that haven’t panned out so far in 2025:
Stocks
What was expected to happen: Optimistic forecasts called for a continued rally in the stock market, driven by lower tax rates, deregulation, and a focus on lowering energy costs.
What’s actually happened: While the S&P 500 is up about 3% year-to-date, it’s lagging behind international peers, with the MSCI All Country World ex-USA Index up about 5% over the same time period.
“There is clearly a move towards a looser regulatory climate, but because the initial changes were implemented so quickly, the courts have put many on indefinite hold instead,” Steve Sosnick, chief strategist at Interactive Brokers, told Business Insider.
Additionally, individual stocks and other assets tied to the Trump trade are suffering. Shares of Trump Media Group and Tesla were down 11% and 19% year-to-date through Tuesday, respectively. Bitcoin, which surged to records above six figures weeks after the election, has seen its rally stall. The token is up just 3% year-to-date as policy announcements have mostly failed to provide a fresh catalyst for more gains.
Bond yields
What was expected to happen: Bond yields were expected to rise on the prospect of mass deportations and aggressive tariffs, which were predicted to lead to a rebound in inflation. That was seen hamstringing the Federal Reserve’s ability to cut interest rates, and even raised the prospect of further hikes from the central bank.
What’s actually happened: The 10-year US Treasury yield has edged lower since the start of the year, falling from 4.57% to as low as 4.42% in recent days. Odds up to two interest rate cuts from the Fed have moved higher since the start of the year. Yields did increase 11 basis points on Wednesday after a hotter-than-expected January inflation report.
US dollar
What was expected to happen: The US dollar was seen gaining versus its international counterparts on the prospect of higher interest rates and protectionist trade policies implemented by the Trump administration.
What’s actually happened: The US dollar index — which weights the dollar against a basket of major currencies — had declined by about 0.4% since the start of the year through Tuesday. The index rose 0.3% on Wednesday after the inflation numbers.
“Tariffs were thought to be a boon for the dollar, but the stop/start nature of some of the key announcements has blunted that rally,” Sosnick said.
According to Sosnick, the current state of the Trump trade reflects the old Wall Street adage: buy the rumor, sell the news.
“Markets are very good at anticipating, and thus pricing in, the potential benefits of any developments — governmental or corporate — that might come their way,” Sosnick said. “Yet some disappointment arises if the likely timeframe for receiving those benefits is longer than expected.”
“That is to some extent what we are seeing now. Even a government that seems to be operating at warp speed can’t necessarily meet the loftiest expectations of impatient investors.”
