President Trump's New Tariffs on 60 Countries Just Took Effect, and the "Trump Trade" Index Is Down 16%. Should Investors Worry?

We all know that President Trump's policies have had an outsize impact on American life. Perhaps more than any president before him, Trump has also had an impact on the stock market. From his eponymous Trump Media & Technology Group (NASDAQ: DJT) to the "Liberation Day" market aftermath in April 2025, there's no denying that Trump has been able to move the performance of specific stocks and entire markets.

Naturally, savvy traders want to cash in on these market effects. Enter the so-called "Trump Trade," in which investors bought stocks and ETFs that stood to benefit from Trump's stated policies of cutting housing regulations, upping defense spending, and reshoring manufacturing to the U.S.

One of those traders was Ned Davis Research, which assembled a basket of Trump Trade exchange-traded funds (ETFs) it dubbed the "Trump Trade Index." Unfortunately for Ned Davis and other Trump Trade investors, things haven't gone according to plan this year. Here's why not, and whether investors should worry.

President Donald J. Trump delivers remarks at the General Motors Proving Ground in Milford, Michigan, on Monday, July 27, 2026. Image source: Official White House Photo by Daniel Torok.

A sharp reversal

Early in the year, it looked as though the Trump Trade strategy was paying off in spades.

On March 1, many of the Trump Trade Index's component ETFs were up sharply for the year. The Global X Defense Tech ETF (NYSEMKT: SHLD) was up 15.5%, the Global X Uranium ETF (NYSEMKT: URA) was up 27.2%, and the VanEck Rare Earth and Strategic Metals ETF (NYSEMKT: REMX) was up a jaw-dropping 35.1%.

The success of these funds was even more remarkable, considering the S&P 500 (SNPINDEX: ^GSPC) had risen only 0.5% during that time.

But as the war in Iran has dragged on and tariffs have remained in force, the Trump Trade Index components have suffered. The index is now down 16% since May, according to Ned Davis Research, and many of its component ETFs are in negative territory for the year, with the Global X Defense Tech ETF down 0.9%, the Global X Uranium ETF down 4.5%, and the VanEck Rare Earth and Strategic Metals ETF down 8.7%.

Even Trump-focused ETFs like the Point Bridge America First ETF (NYSEMKT: MAGA), which is up 10.6% for the year, are lagging the S&P 500, which has gained 11% so far in 2026.

Image source: Getty Images.

Unintended consequences

Although Trump's policy positions toward the key Trump Trade sectors of homebuilding, defense, and manufacturing haven't changed, his actions have produced unintended consequences that have been problematic for those very sectors.

For example, the tariffs and the Iran war have pushed inflation higher, which has caused interest rates to remain high. High interest rates have slowed down the housing market, which has impacted homebuilding. Meanwhile, overall economic uncertainty has affected the broader economy, and these issues aren't showing signs of going away anytime soon.

Even if a president comes to office planning to boost a particular sector of the economy, those plans don't always come to fruition. The best strategy for long-term wealth building is usually to spread your investments across high-quality businesses across multiple sectors, rather than focusing narrowly on a few industries that might get left in the dust.

Investors who are still pursuing the Trump Trade strategy may want to branch out to other sectors to preserve their nest egg.

John Bromels has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.