February 26, 2025 | Trumphoria Under Review

After the U.S. election, Trumphoria swept financial markets with parabolic moves in many risk assets into the new year.

However, the realization may have dawned in the past month that government spending cuts, fewer immigrants, and tariffs mean more job losses, lower economic growth, and fewer passive capital flows into the stock market.

From its January peak, Bitcoin is -16.2 %; semiconductors (SMH) are -9%; the tech-heavy Nasdaq is -5.7 %; the small-cap Russell 2000 is -10 %—and still below where it peaked in September 2021; the Dow Transports Index is also -10 %; the Dow Industrial Index is -3 %; and the S&P 500 and Canada’s TSX are both down about 2.5%.

Cyclical sectors are in full panic mode, with the S&P 500 Homebuilders index down 32%, the auto sector down 29%, and Oil (WTIC) down 14%.

For now, at least, fears of disappointing growth and earnings have overcome fears about inflation.

On the upside, Treasury bonds have been rallying, with the 10-year U.S. Treasury price +5.2% since December 1. This has brought the 10-year yield down from 4.8% to 4.3%, the lowest since December 12 and July 9, 2024, before that.

Correcting the financial mess and policy-made economic dislocations of the past decade was never going to be pain-free. The electorate has little pain tolerance and fickle affection. With home prices wobbling and layoffs rising, weakness in widely held stocks will be the final straw. Consumer and business sentiment are souring all over the world.

As Elon Musk began underwriting the new president, Tesla shares became synonymous with Trumphoria, doubling in price from October to December 2024. But most are focusing on the 37% drop since December and counting. What have you done for us lately?

Asset bubbles are a mirage; they look great until they disappear, and then most people are left more thirsty and desperate than ever before. Being a capital owner and manager is a tough and dangerous job in these conditions; being a politician is even worse. Unrealistic high hopes are certain to be disappointed.

Danielle Park February 26th, 2025

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