In the aftermath of Donald Trump's election victory, U.S. stocks and Bitcoin surged while gold weakened. However, recent shifts in the "Trump Trade" have seen equities and cryptocurrencies reverse course, with gold regaining momentum. Meanwhile, the dollar and Treasury yields continue their upward trajectory.
Market Reversals Take Center Stage
The U.S. stock market's turnaround has been particularly pronounced. After two consecutive years of >20% gains for the S&P 500, 2025 opened weakly with all three major indices in negative territory. As of January 10:
- Dow Jones: -1.42% YTD
- S&P 500: -0.93%
- Nasdaq: -0.77%
The Treasury selloff intensified, pushing yields sharply higher:
- 10-year yield: ~4.8% (highest since November 2023)
- 30-year yield: Broached 5%
What's Driving the Shift?
Despite consistent policy messaging from Trump, market dynamics are evolving due to:
- Fed Policy Pivot: December's hawkish FOMC meeting ignited the reversal
- Economic Data Strength: January's robust jobs report (256K new jobs vs 160K expected)
- Valuation Pressures: Elevated stock valuations and rising borrowing costs
"Unlike 2016-2017's global recovery backdrop, 2025 presents more complex crosscurrents," notes Zhang Chi, chief analyst at Founder Securities. "With tech earnings slowing and rates climbing, we expect 5-10% S&P 500 gains but heightened volatility."
Sector Rotation and Asset Performance
Equity Markets
- Leadership Change: Growth/large-cap stocks now outperforming cyclical sectors
- November vs December: Financials/energy surged 11% in November, then fell 8% last month
Alternative Assets
| Asset | Current Trend | Key Driver |
|---|---|---|
| Gold | Rebounding | Rising real yields cap gains |
| Bitcoin | Below $100K | Fed's crypto stance hardened |
"Bitcoin's retreat after its Trump Trade rally shows how quickly sentiment shifts," observes economist Zhong Zhengsheng. "The Fed's independence on crypto policy proved decisive."
The Road Ahead for Trump Trade
Three scenarios could unfold after inauguration:
Stagflation Trade (if tariffs/immigration policies exceed expectations):
- Stocks/bonds fall
- Dollar strengthens
Disinflation Trade (if deregulation dominates):
- Risk assets rally
- Dollar weakens
- Status Quo: Choppy consolidation across markets
"Phase 1 of the Trump Trade is ending," warns Zhang Chi. "The next wave likely won't match initial enthusiasm unless new policy catalysts emerge."
FAQ: Understanding the Trump Trade Shift
Q: Why did Bitcoin become a Trump Trade barometer?
A: Trump's pro-crypto platform (including proposed "Bitcoin reserves") initially fueled rallies until Fed pushback.
Q: How long can Treasury yields stay elevated?
A: With core CPI still at 3.3%, markets now price just one 2025 rate cut versus two previously.
Q: Where are the relative value opportunities now?
A: Healthcare stocks offer defensive appeal, while tech awaits better valuations. 👉 Explore market strategies
Q: What could reignite the Trump Trade?
A: Surprise policy moves on tariffs or deregulation, though legislative hurdles remain high.
Key Terms: Trump Trade, Treasury yields, sector rotation, Bitcoin, Fed policy, stagflation risk