Economic security

Stocks Show It Hasn't Paid to Be Long on Donald Trump

U.S. stocks were on the defensive Thursday as traders awaited the results of a crucial meeting between U.S. and Chinese trade negotiators. With little to divine from the day’s market activity, it’s a good time to dissect the longer-term price action in equities to see what that might say about the Trump administration’s willingness to escalate the trade wars.

In the lead-up to the 2016 U.S. Presidential election, every major Wall Street firm complied lists of stocks that would likely do well if either Donald Trump or Hillary Clinton won. As we all know, Trump won, and Morgan Stanley’s Long Trump Basket of 54 stocks (those seen as benefiting the most from his presidency) outperformed the S&P 500 Index from the election through 2017. Then came Trump’s trade wars, and rather than helping his constituents, they have had a detrimental effect – at least in the stock market. The Morgan Stanley index has fallen 6.94% since the Trump administration implemented tariffs on imported steel and aluminum in March 2018, compared with a gain of 4.81% in the S&P 500. That gap in performance is the widest since Trump was elected in November 2016. To be sure, Chinese stocks have done even worse, with the MSCI China Index dropping 14.6%. And even though the broad U.S. stock market is up, albeit not by much, that’s largely due to tech-related shares instead of old-economy type stocks such as those in the industrial sector that Trump vowed help while on the campaign trail.