Trump Trade Falters Amid Iran Conflict and Inflation Concerns

The 'Trump Trade' has lost steam due to the US conflict with Iran, which has pushed up energy prices, inflation expectations, interest rates, and the value of the US dollar. The Ned Davis Research's Trump Trade Index, consisting of a dozen exchange-traded funds expected to benefit from White House policies on homebuilding, defense spending, and manufacturing re-shoring, has slumped about 16% since May.

Several ETFs in the gauge are now trading lower for the year. The breakdown is attributed to the Iran war and inflation, according to Ned Davis Research. Pat Tschosik, chief thematic strategist at Ned Davis Research, noted that investors have been subjected to 'inflation shocks' between tariffs, wars, or supply chain disruptions.

Fund flows indicate a steady stream of investors abandoning some trades. The Truth Social God Bless America ETF has seen consistent outflows every month since the war began. It has dropped more than 4% this year while the S&P 500 has climbed about 8%.