Ned Davis Research reports 16% drop in Trump Trade index as political bets unravel

There’s a particular kind of market humiliation reserved for trades built on vibes rather than fundamentals. The Trump Trade, as Wall Street branded it, seemed like a sure thing in late 2024. A dozen ETFs tied to homebuilding, defense, and domestic manufacturing surged past the S&P 500 in the opening months of the year. Then came May.

Ned Davis Research’s Trump Trade Index has fallen roughly 16% since May, erasing the outperformance that made the strategy look so clever just a few months earlier. Several of the component ETFs are now trading in negative territory for the year.

What’s actually driving the reversal

The unwinding isn’t random. Escalating tensions between the US and Iran pushed energy prices higher, which fed back into inflation expectations. Higher inflation means higher interest rates, and higher rates are generally bad news for rate-sensitive sectors like homebuilding, which was one of the core themes in the index. The stronger US dollar that accompanied those moves added another headwind for the reshoring and manufacturing plays that were supposed to benefit from tariff policy.

The index originally cast a wide net. Early iterations included Bitcoin and space-related sectors as beneficiary themes alongside reshoring.

Crypto’s Trump trade looks even worse

Bitcoin peaked above $125,000 following the 2024 election, riding a wave of genuine policy optimism. The Trump administration moved to establish a Strategic Bitcoin Reserve, funded through seized assets, and pushed forward on stablecoin regulation.

Bitcoin has since lost all of its post-election gains, with declines exceeding 50% from those highs.

Trump-branded memecoins took the sharpest hits of all. Tokens like $TRUMP and $MELANIA have shed approximately 98% of their value from peak levels.

Trump Media and Technology Group added another layer to the story by exploring crypto-related products, further entangling the political brand with digital asset markets.

What this means for investors watching both markets

For crypto investors specifically, the 50%-plus decline from Bitcoin’s post-election peak is a reminder that even genuine regulatory tailwinds can be overwhelmed by macro pressure. The asset class remains deeply correlated with risk sentiment, and when traditional markets get nervous, crypto tends to amplify the move rather than diversify against it.

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