President Donald Trump’s return to the White House on January 20 has significantly influenced US and global markets.

The S&P 500 has dropped nearly 8% since his inauguration, reflecting shifts in domestic and foreign policies.

Defense-related companies have seen notable gains. Palantir’s stock surged nearly 60% during this period, benefiting from its work with the Department of Homeland Security.

In contrast, the S&P 1500 airlines index has lost nearly a third of its value, with major carriers like Delta Air Lines and American Airlines revising their annual outlooks downward.

Tesla’s stock has declined by 33%. Retailers have also struggled amid reduced discretionary spending.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Trade policy uncertainty has historically been a significant market driver

The market’s sharp reaction to Trump’s trade policies follows an established pattern from his first term, when trade announcements regularly triggered market volatility.

During previous trade tensions with China, researchers identified 28 specific days where trade-related news significantly impacted Treasury rates, high-yield spreads, and stock prices 1.

Studies show unprecedented levels of trade policy uncertainty during earlier US-China trade conflicts, with direct correlations between tariff announcements and market declines 2.

The S&P 500’s current 8% drop since inauguration mirrors similar patterns from 2019, when the Dow and S&P 500 fell approximately 3% in a single day following tariff escalations 3.

Congressional Budget Office analysis previously estimated that Trump-era tariffs cost the average household about $1,277 annually in 2020, providing context for current market concerns about consumer spending 4.

This persistent pattern explains why companies like Teradyne, which explicitly cited “tariffs and trade curbs” for business volatility, have seen their stock drop 44.5% since January.

2️⃣ Companies with domestic focus outperform amid trade uncertainty

The market’s current bifurcation between winners and losers reflects a documented pattern where companies’ exposure to global trade determines their vulnerability to tariff impacts.