"Trump Deal" suffers heavy losses

A year after Trump's return to the White House, the once-popular "Trump trade" is facing severe setbacks. Assets that were bet to perform well during his presidency, especially stocks and cryptocurrencies directly associated with Trump and his family, have significantly declined, causing substantial losses for some investors. According to The Wall Street Journal, since Trump's inauguration, the stock price of Trump Media & Technology Group (DJT), which operates his social platform "Truth Social," has plummeted by 75%. The "meme coins" named after Trump and First Lady Melania have seen declines of up to 86% and 99%, respectively, since the inauguration. Another cryptocurrency project involving the Trump family, a token called "World Liberty Financial," has also dropped about 40% since its launch in September. These assets directly linked to the president and his family have been heavily impacted in the sell-off that has swept through the most expensive and speculative corners of the market. This wave of selling has also affected risk assets, including Bitcoin and AI darling CoreWeave. Initially, investors expected the Trump administration to bring about deregulation, tax cuts, and support for cryptocurrencies, driving related assets to continue rising. However, as investors now shift their focus from his political prospects to the actual performance of these companies and concerns over his global trade policies, the once-optimistic expectations have been overturned. Speculative frenzy fades, associated assets hit hard The plunge in Trump-related assets coincides with a general cooling of market speculation. Nick Giorgi, chief equity strategist at Alpine Macro, stated, "This is a healthy pullback after a speculative frenzy," adding that portfolios tracking meme stocks, retail favorites, unprofitable tech companies, and momentum stocks have all suffered significant losses over the past month. The cooling of speculative sentiment is not limited to Trump's business landscape. A basket of unprofitable tech stocks tracked by Goldman Sachs, which soared earlier this year, fell 21% between mid-October and November 21. Trump Media & Technology Group is one of many meme stocks recently hit hard. According to FactSet, the company's price-to-sales ratio is as high as 1240 times. The market shift has caught some individual investors off guard. Last month, a user on the Reddit investment forum who identified as a "DJT holder" stated that he bought the stock at $46, while it is now only $11.07. He asked, "When should I give up and move on?" Mixed macro trading performance The broader "Trump trade" strategy presents a complex picture. Some industry sectors' trading performance aligns with investor expectations: healthcare stocks are up, European defense stocks surged at one point, clean energy companies are struggling, while large Wall Street banks like Goldman Sachs are performing well. However, concerns over economic slowdown and a weakening credit environment have led to underperformance among regional banks, and the largest private prison stocks have also seen significant declines after a post-election surge, heading into 2025 In the alternative asset space, gold has emerged as the winner. With investors concerned about the future of the dollar or seeking to hedge against market turmoil, a significant amount of money has flowed into gold, driving prices to record highs this year. Gold is currently trading around $4,200 per troy ounce, up nearly 60% year-to-date, and not far from the historical high set in October. In contrast, after a strong rally, Bitcoin has faced a brutal sell-off since October, dropping 30% in less than two months. This turmoil in the cryptocurrency market has also affected the business landscape of Trump, which has deeply engaged in the industry. Bob Elliott, CEO of Unlimited Funds, stated that while those concentrated in these crypto assets are "feeling immense pain," the macro impact appears quite small, suggesting limited systemic risk. Market Focus on Inflation and Interest Rate Outlook Looking ahead, investors will turn their attention to the Federal Reserve's preferred inflation gauge—the Personal Consumption Expenditures Price Index (PCE)—set to be released next week. Following recent comments from Federal Reserve officials, traders are widely betting that the central bank will cut interest rates at its December meeting. Expectations of lower rates have helped stabilize market sentiment. Despite increased volatility in the S&P 500 index this fall, with investors cautiously reassessing valuations of some large tech companies, the index has shown resilience, rebounding from each sell-off and currently sitting less than 2% away from its all-time high. Additionally, amid geopolitical and economic growth uncertainties, shorting long-term U.S. Treasuries has been a good bet, as concerns over the deficit have kept yields elevated. Meanwhile, the dollar has generally weakened, partly due to market worries that planned tax cuts and other policies will exacerbate deficit spending