The numbers come first.
The Ned Davis Research Trump Trade Index — a dozen exchange-traded funds tied to homebuilding, defense spending and manufacturing re-shoring — has fallen roughly 16% since May, according to Ned Davis Research. Several of the ETFs in the gauge are now trading lower for the full year, even after posting double-digit gains through the first quarter.
The S&P 500, by contrast, has climbed about 8% year to date. The divergence is sharp and measurable.
What broke the trade
Ned Davis Research points squarely at the U.S. conflict with Iran. The war pushed up energy prices, lifted inflation expectations, pressured interest rates higher and strengthened the dollar — a combination that undercuts the cost-sensitive re-shoring and homebuilding themes that underpinned the original thesis.
'All this is tied to the Iran war and inflation,' said Pat Tschosik, chief thematic strategist at Ned Davis Research. 'Let's just go three months without some sort of inflation shock — between some sort of tariff, or war, or supply chain disruption, could we just go three months without some sort of supply shock?'
Matt Gertken, chief geopolitical strategist at BCA Research, offered a similar diagnosis. 'Investors who bet on AI and against traditional cyclical sectors outperformed, while those who saw Trump as a champion of U.S. manufacturing, heavy industry and working-class consumption suffered,' he said.
Fund-level damage
The Truth Social God Bless America ETF — ticker YALL, with heavy exposure to energy, industrials and financials — has recorded consistent monthly outflows since the Iran war began and is down more than 4% this year. Trump Media & Technology Group, though not held by YALL, is down 35% year to date, despite a partial rally in July.
Not every fund is underwater. The Point Bridge America First ETF (MAGA) has roughly matched the S&P 500's performance. Hal Lambert, founder of Point Bridge Capital, credited the fund's energy weighting: 'There's a lot of energy in the MAGA ETF,' he said, acknowledging that re-shoring themes face near-term headwinds from elevated energy costs.
Earlier standouts — the VanEck Rare Earth and Strategic Metals ETF, the Global X Uranium ETF and the Global X Defense Tech ETF — were each up at least 20% at various points in the first quarter before eventually flipping negative.
Policy legibility is the deeper problem
Beyond the Iran shock, investors cite a structural challenge: parsing White House policy in real time. The administration this week moved to replace the expired temporary 10% global tariff with targeted actions under Section 338 of the Tariff Act of 1930 and imposed 50% tariffs on a range of Canadian products, including beer, wine, paper and hockey sticks. China and Europe are expected to face additional Section 338 actions.
'There's always something — the Iran war, the tariffs,' said Michael O'Rourke, chief market strategist at JonesTrading Institutional Services. 'It's to the point that investors are just shutting these policies out the best they can, because they really can't handicap them.'
CEO Times take
Free markets reward predictability above almost everything else. Capital can absorb a tariff, a war premium or a rate shock — what it struggles to price is the sequence of all three arriving without a stable policy horizon. The Trump Trade was never a bet against free enterprise; it was a bet on a specific, durable policy path. What the index is telling investors now is that execution risk and geopolitical overhang have outweighed the underlying thesis — at least for this quarter.
The administration's pivot to Section 338 targeted tariffs suggests a more surgical approach may be taking shape. If that discipline holds, and if the Iran situation stabilizes, the re-shoring and defense-spending fundamentals that animated the original trade have not disappeared. The market has not voted against the agenda permanently — it has voted against uncertainty. That is a solvable problem.
