We now find ourselves fully immersed in the age of Trump 2.0, and it’s fair to say that waters have been choppier than usual. As markets attempt to anticipate the famously unpredictable President’s every move, every statement has become a potential key event on Wall Street. Although Trump’s America First agenda, which appears to be heavily focused on deregulation, the cutting of international aid, and other expenses deemed unnecessary by the returning President, appears to be heavily growth-focused, the widespread uncertainty surrounding his every utterance is leading to widespread volatility. Despite this, the S&P 500 climbed 4.61% between Trump’s resounding election win on November 5, 2024, and his inauguration on January 21, 2025, the recent announcement of 25% tariffs on Canada and Mexico, as well as an additional 10% on Chinese imports has seen Wall Street struggle for momentum in the early days of the President’s second term. Unpicking The Fallout from Trump’s Tariffs One notable case of global market volatility came in the form of Trump’s non-announcement and subsequent announcement of trading tariffs in the early days of his White House return. Markets had initially calmed after the President didn’t announce the tariffs promised during his inauguration, only for jitters to resume when he suggested that they would be introduced on February 1, 2025. Even in the hours leading up to the imposition of the tariffs, a false report that a delay until March 1, 2025, caused more market confusion before being quickly denied by Trump’s press secretary. The uncertainty until the end as to whether Trump would follow up on his tariff threats saw the S&P 500 dip 1.6% in the early hours of trading following the announcement despite the threat of their imposition being long factored into markets. Tariffs can carry a long-term impact on market volatility due to the additional taxes that are required on imports, the threat of retaliatory tariffs as part of a larger international trade war, and the prospect of companies seeking alternative supply chains to ease the economic impact. Markets can also be confounded by the impact of inflation, which may occur if US importers pass on higher supply chain costs as a result of tariffs on to consumers. This would rapidly increase the cost of living and damage consumer spending power. This, coupled with Trump’s proposed mass deportations, could undermine American industry, shrinking labor pools and pushing more upward pressure on prices. While these events are speculative, they will see more institutions focus their attention on reacting quickly to emerging market data surrounding CPI and US labor insights, which paves the way for more dramatic market responses to confounding datasets. What Will Happen to US Financial Markets? Macro strategy risk taker Russel Matthews has suggested that markets will become more erratic, random, and chaotic in the age of Trump 2.0, and this should be a core factor to keep in mind when it comes to risk management. While this could pave the way for institutions to adopt a more cautious, less greedy approach to profit-taking, we’re set to see more nuanced strategies among investors to overcome the threat of volatility. Likewise, J.P. Morgan’s global investment strategy team has suggested a diversified approach to withstand the uncertainties that could occur during Trump’s second term, prioritizing a resilient portfolio to help achieve long-term financial goals. But is there really a tangible threat to the long-term progress of US financial markets? It’s worth noting that the first Trump administration posted a healthy 83% cumulative return for the S&P 500 between 2017 and 2020, with one drawdown of around 15% in 2018 and the pandemic crash of 35% in early 2020. This serves as a timely reminder that the stock market generally trends upward over time, regardless of who’s in the White House. However, it’s also worth noting that Trump’s control of the House of Representatives, Congress, and the Senate means that the returning President has far more room to enact his most ambitious policies this time with less scrutiny. “Over time - as markets adapt - the effects of Trump's policies may stabilize, depending on the success of their implementation and broader economic conditions,” explains Maxim Manturov, head of investment research at Freedom24. “For example, if tax breaks successfully stimulate growth without causing excessive inflation or trade wars to escalate into protracted conflicts negatively impacting global supply chains - investors may find that relative stability returns after initial spikes in volatility.” “Therefore, while short-term reactions may be dramatic following Trump's statements/actions, understanding how they translate into long-term trends becomes crucial for investors seeking to effectively mitigate risk in the face of continued uncertainty surrounding his presidency.” Opportunities in Deregulation Amid concerns over the impact of tariffs and trade wars, it’s easy to forget that Trump is attempting to instill a pro-growth outlook for US industries. The announcement of the SoftBank, OpenAI, and Oracle joint venture called ‘Stargate’ was unveiled by Trump and is an example of the United States’ bid to use deregulation to boost leadership in key areas like artificial intelligence. With the initial investment totaling $100 billion, with the aim to increase to at least $500 billion over the course of Trump’s term, we can expect the initiative to pave the way for AI stocks to build their global market dominance in a way that can support long-term growth on Wall Street. Trump’s controversial statement in December, promising that any person or company investing at least $1 billion into the US would receive fully expedited approvals and permits, including all environmental approvals, is another example of the President’s focus on market growth in a deregulation environment. Volatility to Remain We can be certain that higher levels of market volatility will remain throughout Trump’s second term, but the President’s growth-focused approach appears likely to uncover fresh investment opportunities for institutional and retail investors alike. Overall, the impact of Trump’s tariffs and subsequent trade wars may play a deciding role in the health of US markets, but Wall Street’s historical long-term growth should offer a sense of comfort to investors who could be caught up in short-term price shifts over the next four years. We now find ourselves fully immersed in the age of Trump 2.0, and it’s fair to say that waters have been choppier than usual. As markets attempt to anticipate the famously unpredictable President’s every move, every statement has become a potential key event on Wall Street. Although Trump’s America First agenda, which appears to be heavily focused on deregulation, the cutting of international aid, and other expenses deemed unnecessary by the returning President, appears to be heavily growth-focused, the widespread uncertainty surrounding his every utterance is leading to widespread volatility. Despite this, the S&P 500 climbed 4.61% between Trump’s resounding election win on November 5, 2024, and his inauguration on January 21, 2025, the recent announcement of 25% tariffs on Canada and Mexico, as well as an additional 10% on Chinese imports has seen Wall Street struggle for momentum in the early days of the President’s second term. Unpicking The Fallout from Trump’s Tariffs One notable case of global market volatility came in the form of Trump’s non-announcement and subsequent announcement of trading tariffs in the early days of his White House return. Markets had initially calmed after the President didn’t announce the tariffs promised during his inauguration, only for jitters to resume when he suggested that they would be introduced on February 1, 2025. Even in the hours leading up to the imposition of the tariffs, a false report that a delay until March 1, 2025, caused more market confusion before being quickly denied by Trump’s press secretary. The uncertainty until the end as to whether Trump would follow up on his tariff threats saw the S&P 500 dip 1.6% in the early hours of trading following the announcement despite the threat of their imposition being long factored into markets. S&P 500 dip 1.6% S&P 500 dip 1.6% Tariffs can carry a long-term impact on market volatility due to the additional taxes that are required on imports, the threat of retaliatory tariffs as part of a larger international trade war, and the prospect of companies seeking alternative supply chains to ease the economic impact. Markets can also be confounded by the impact of inflation, which may occur if US importers pass on higher supply chain costs as a result of tariffs on to consumers. This would rapidly increase the cost of living and damage consumer spending power. This, coupled with Trump’s proposed mass deportations, could undermine American industry, shrinking labor pools and pushing more upward pressure on prices . upward pressure on prices upward pressure on prices While these events are speculative, they will see more institutions focus their attention on reacting quickly to emerging market data surrounding CPI and US labor insights, which paves the way for more dramatic market responses to confounding datasets. What Will Happen to US Financial Markets? Macro strategy risk taker Russel Matthews has suggested that markets will become more erratic, random, and chaotic in the age of Trump 2.0, and this should be a core factor to keep in mind when it comes to risk management. While this could pave the way for institutions to adopt a more cautious, less greedy approach to profit-taking, we’re set to see more nuanced strategies among investors to overcome the threat of volatility. Likewise, J.P. Morgan’s global investment strategy team has suggested a diversified approach to withstand the uncertainties that could occur during Trump’s second term, prioritizing a resilient portfolio to help achieve long-term financial goals. But is there really a tangible threat to the long-term progress of US financial markets? It’s worth noting that the first Trump administration posted a healthy 83% cumulative return for the S&P 500 between 2017 and 2020, with one drawdown of around 15% in 2018 and the pandemic crash of 35% in early 2020. 83% cumulative return 83% cumulative return This serves as a timely reminder that the stock market generally trends upward over time, regardless of who’s in the White House. However, it’s also worth noting that Trump’s control of the House of Representatives, Congress, and the Senate means that the returning President has far more room to enact his most ambitious policies this time with less scrutiny. “Over time - as markets adapt - the effects of Trump's policies may stabilize, depending on the success of their implementation and broader economic conditions,” explains Maxim Manturov, head of investment research at Freedom24. “For example, if tax breaks successfully stimulate growth without causing excessive inflation or trade wars to escalate into protracted conflicts negatively impacting global supply chains - investors may find that relative stability returns after initial spikes in volatility.” “Therefore, while short-term reactions may be dramatic following Trump's statements/actions, understanding how they translate into long-term trends becomes crucial for investors seeking to effectively mitigate risk in the face of continued uncertainty surrounding his presidency.” Opportunities in Deregulation Amid concerns over the impact of tariffs and trade wars, it’s easy to forget that Trump is attempting to instill a pro-growth outlook for US industries. The announcement of the SoftBank, OpenAI, and Oracle joint venture called ‘Stargate’ was unveiled by Trump and is an example of the United States’ bid to use deregulation to boost leadership in key areas like artificial intelligence. With the initial investment totaling $100 billion , with the aim to increase to at least $500 billion over the course of Trump’s term, we can expect the initiative to pave the way for AI stocks to build their global market dominance in a way that can support long-term growth on Wall Street. investment totaling $100 billion investment totaling $100 billion Trump’s controversial statement in December, promising that any person or company investing at least $1 billion into the US would receive fully expedited approvals and permits, including all environmental approvals, is another example of the President’s focus on market growth in a deregulation environment. fully expedited approvals fully expedited approvals Volatility to Remain We can be certain that higher levels of market volatility will remain throughout Trump’s second term, but the President’s growth-focused approach appears likely to uncover fresh investment opportunities for institutional and retail investors alike. Overall, the impact of Trump’s tariffs and subsequent trade wars may play a deciding role in the health of US markets, but Wall Street’s historical long-term growth should offer a sense of comfort to investors who could be caught up in short-term price shifts over the next four years.

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The Age of Volatility: Readying for the Unpredictability of Trump 2.0

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