My Trump Trade Went Bust — With a Consolation Prize

In the aftermath of the 2024 U.S. presidential election, investors worldwide are reassessing their portfolios and adjusting their strategies. For many, the Trump trade, which bet on U.S. stocks and the dollar, has proven to be a bust. However, some investors, like me, found a consolation prize in the market dislocations and undervalued assets that emerged from the election's uncertainty.

As the dust settles on the 2024 election, it's clear that the Trump trade, which focused on U.S. stocks and the dollar, has taken a significant hit. The S&P 500 has fallen nearly 5% since Election Day, while the dollar has weakened against major currencies. Meanwhile, European equities and emerging market shares have rebounded, with the MSCI Europe Index up nearly 2% and the MSCI Emerging Markets Index up over 3% (Source: Bloomberg).

However, the Trump trade's demise has created opportunities for investors willing to look beyond the U.S. market. European auto stocks, which touched their lowest in almost two years, and the Mexican peso, which fell more than 2.5% versus the dollar this month, have presented attractive entry points for those with a contrarian bent.

In my case, I took advantage of the market's pessimism and bought into these undervalued assets. European car-makers, such as Volkswagen and BMW, have since recovered, with their shares trading at around 3.3 times forecast earnings. Similarly, the Mexican peso has appreciated, gaining nearly 2% against the dollar since the election.



But the consolation prize didn't stop at European autos and the Mexican peso. I also increased my holdings of Chinese stocks and Brazilian bonds, betting on a potential turnaround in these markets. While the performance of these assets has been mixed, the diversification and potential long-term growth opportunities they offer have been worth the risk.

In hindsight, the Trump trade's failure should come as no surprise. The U.S. economy's strength was largely inherited from the Obama administration, and the Trump administration's policies, such as tariffs and immigration restrictions, created headwinds for many sectors. Moreover, the broad U.S. stock market tends to move more on long-term growth in profits than anything else, making it less sensitive to short-term political developments.

As investors look ahead to the Trump administration's second term, it's crucial to remain vigilant and adaptable. While the Trump trade may have gone bust, the consolation prize of undervalued assets and market dislocations can still be found. By maintaining a balanced portfolio, combining growth and value stocks, and favoring 'boring but lucrative' investments, investors can navigate the uncertain political landscape and capitalize on market opportunities.

In conclusion, the Trump trade's failure serves as a reminder that no investment strategy is foolproof. However, by staying informed, adaptable, and open to contrarian opportunities, investors can turn a bust into a consolation prize. As the political winds shift, so too must our investment strategies.