Investors think tariffs aren’t a top priority for Trump, sending vulnerable stocks and sectors soaring
The market is betting (hoping?) that the president’s bark is worse than his bite.
On the first trading day of the Trump administration, investors flocked to the parts of the stock market that would be most imperiled if the president’s rhetoric on trade throughout his entire life as a public figure is matched by his actions.
The Industrial Select Sector SPDR Fund — which slumped nearly 15% in 2018, the year Trump ratcheted up trade levies, versus a 6.2% decline for the S&P 500 — was the best-performing sector on Tuesday.
And a basket of stocks compiled by Goldman Sachs as being particularly vulnerable to trade barriers, a group which includes Nike, Target, and Ralph Lauren, gained 3% on the day. This basket also had its best day relative to a cohort of “tariff immune” stocks since November 7, a session when tariff-sensitive stocks enjoyed a relief rally after a massive knee-jerk bout of postelection underperformance.
While the T-word (tariff!) did come up in Trump’s inaugural address, markets are believing that this is much more of a negotiating ploy than policy. Even his past explicit threat to slap 25% tariffs on Canada and Mexico on February 1 is being faded aggressively in betting markets (which, however, do see smaller taxes being enacted against the USMCA partners).
This may reek of complacency, but investors have good reasons for shrugging off some of Trump’s remarks on trade.
