War, Oil and Tariffs Erase 16% From the Trump Trade Since May

The market strategy built around President Donald Trump's economic agenda has reversed after an early-year surge. A 12-fund index tracking homebuilding, defense and U.S. manufacturing themes has fallen about 16% since May. The decline shows how quickly a policy trade can break when the same agenda lifts the costs facing its intended winners.

Ned Davis Research assembled the basket from 12 ETFs selected for their exposure to administration priorities. On July 25, 2026, the research firm's latest assessment tied the reversal mainly to the war with Iran and the inflation shock moving through energy markets. The gauge had beaten the S&P 500 early in the year; several components are now negative for 2026.

Oil Repriced the Manufacturing and Housing Bet

The transmission chain runs from conflict to oil, then into inflation expectations, interest rates and the U.S. dollar. Higher energy costs press manufacturers directly, while higher rates make factories, housing projects and equipment purchases more expensive to finance. A stronger dollar can add another obstacle for U.S. companies selling abroad. Those pressures cut across the reshoring and homebuilding themes inside the Trump Trade Index.

For the research firm, thematic strategist Pat Tschosik reduced that chain to its immediate cause:

“All this is tied to the Iran war and inflation.”

The speed of the change matters. VanEck's Rare Earth and Strategic Metals fund briefly stood at least 20% above its start-year level during the first quarter. Global X products focused on uranium and defense technology also crossed that threshold. All three preserved part of those gains into the second quarter before falling below their opening levels. The inflation and financing shock from the Iran conflict overtook a basket built to capture policy support.

AI investment created a second split. BCA Research found that investors favoring AI themes over traditional cyclical sectors performed better, while themes tied to factories, industrial companies and working-class consumer demand fell behind. The comparison is not simply technology against old industry. It separates businesses receiving immediate capital for AI expansion from businesses that need stable rates, demand and construction conditions to justify long-lived projects.

Fund Flows Show Investors Separating the Baskets

The Truth Social God Bless America ETF, which trades as YALL, has recorded outflows every month since the Iran war began. Its heavier exposure to energy, industrials and financials did not prevent a decline of more than 4% this year. Over the same period, the S&P 500 gained about 8%. That 12-point gap is a clearer measure of opportunity cost than the political label attached to either fund.

YALL does not own Trump Media & Technology Group, but that stock supplies another reference point. Trump Media remains down 35% for the year despite a rally in July. The Point Bridge America First ETF, using the MAGA ticker, is an exception: it has stayed positive for 2026 and lost less than the wider market when the Iran war began, helped by energy exposure. Point Bridge founder Hal Lambert said that allocation allowed the fund to roughly match the S&P 500 despite concern over oil prices.

The different results show that there is no single Trump trade left. Energy holdings can cushion one fund while manufacturing and housing exposure weighs on another. Fund construction now matters more than the slogan. Investors who bought a political theme still own specific sectors, financing needs and commodity sensitivities, and those components respond differently when oil approaches the center of the economic outlook.

Tariff policy has added another moving input. After a temporary across-the-board 10% levy expired, the administration shifted to targeted action under Section 338. Canadian paper, beer and wine were among products hit by 50% duties; hockey sticks were also included. Chris Krueger of TD Cowen identified China and Europe as likely next targets. Canada is the largest single export market for the United States, so the measures reach companies tied to cross-border demand as well as imports. Investors have also had to price social-media announcements and executive orders that were later narrowed or reversed. Each change forces them to recalculate costs before companies can show how much they can pass to customers.

A Manufacturing Thesis Cannot Outrun Its Financing Costs

Supporters of the reshoring strategy argue that factories take years to plan and build, so short market windows can misread a long industrial policy. That point explains why a manufacturing thesis cannot be judged only by one quarter. It does not erase the financing conditions under which new capacity must be funded. Elevated oil, interest rates and imported input costs can delay the investment that tariffs are intended to attract.

The decisive evidence will come from capital spending, housing investment, factory construction and corporate margins, not the names of the ETFs. A durable reversal would require the inflation channel to ease long enough for rates and the dollar to stop working against cyclical sectors. Continued tariff changes or another supply shock would extend the uncertainty that has already pushed investors toward AI and away from the original policy basket.

The 16% slide is a verdict on sequencing. The administration is asking markets to price future factories while war and tariffs raise present costs. Until those two timelines move in the same direction, the Trump Trade will remain less a unified investment strategy than a collection of exposures competing against one another.