Wall Street enjoys a Trump sugar rush – will it crash?
Wall Street investors could be repeating the mistakes they made in Donald Trump's first term, when many “Trump trades” enjoyed a short pop and then underperformed. Will history repeat itself?

Investors are feeling as “pro-US as a bald eagle eating apple pie”, says Luke Kawa for Sherwood News. Bank of America’s latest global fund manager survey shows marked bullishness on US assets and a dismissive attitude to the rest of the world. Yet investors could be repeating the mistakes they made in the president-elect’s first term when many “Trump trades” – from US small caps to a stronger dollar – enjoyed a short pop only to underperform over the full four-year term.
We are sometimes advised to take Trump “seriously, but not literally”, says James Mackintosh in The Wall Street Journal. On Wall Street that has resulted in a pick ’n’ mix: investors are taking the Trump policies they like (tax cuts and deregulation) seriously, while dismissing those they dislike (immigration clampdowns and high tariffs) as just “campaign rhetoric”.
That could prove exactly wrong. Trump needs Congressional support for his pro-growth plans, but can quickly impose tariffs and immigration rules himself via executive order. Trump’s first year in 2017 was marked by chaos and scrapped trade deals – it was only later that he finally gave Wall Street a tax cut present.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The post-election stock rally has ebbed as Trump unveils his new administration picks, says Randall Forsyth in Barron’s. The nomination of scandal-ridden loyalists promises a lot of bickering ahead that could stop Congress from doing anything useful.
What does US inflation mean for Wall Street?
The inflation that sank Biden’s popularity is now Trump’s problem, says John Mauldin in his Thoughts from the Frontline newsletter. The incoming president’s “basic instinct” to cut government spending is good, but he won’t make the serious changes to welfare policies that would be needed to balance the books. As long as federal deficits stay in the $1.5 trillion range, the new administration will “be dealing with inflationary issues”. US core inflation (which excludes volatile food and energy prices) rose to 3.3% in October. Across a range of statistical measures, “inflation remains above 3%... and is no longer clearly declining”, says John Authers on Bloomberg.
Another headwind is that bond yields are rising. Credit is “meaningfully tighter than many currently working in finance have ever known”. The yield on the US 10-year Treasury Inflation-Protected Security (TIPS), a proxy for interest rates after inflation, is now above 2%. That doesn’t sound like much, but it’s higher than it was for 14 years prior to 2023. Trump isn’t so mad as to pour “fuel” on the “inflationary fire” with massive tariff hikes, says Rana Foroohar in the Financial Times.
But that’s no reason for calm. The US is “way overdue” a recession and big market correction at some point over the next four years. From hidden leverage in private equity to crypto assets that have no lender of last resort, financial risks are mounting. “I think we’ll get a two-year sugar high under Trump,” says Dennis Kelleher of Better Markets, “but down the road, we’re looking at a potentially catastrophic correction – something much worse than 2008.”
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Families suffer £20,000 lost income growth – are you feeling the pinch?
Average incomes for working age families have increased by just 7% in the past two decades, research suggests
-
How to achieve a secure retirement, as more retirees admit to struggling with debt
Twenty-six percent of retirees now have unsecured debt – a sharp rise compared to two years ago – with many underestimating how much a typical retirement costs
-
Small UK industrial stocks are hidden gems
Opinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?
Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeek
Interview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?
The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?
Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in credit
Corporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
'The City's big bet on green finance fails to pay out'
Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Six top investment trusts for smaller stocks
Liquidity constraints mean investment trusts are best placed to seize the juiciest opportunities