Wall Street Battered Again by Trump Chaos as New Winners Emerge

15/03/2025 07:16 AST

This is the market Ben Inker has been waiting for. In the grip of Wall Street's rebellion against President Donald Trump's tariff agenda - with stocks down around 2% this week even after Friday's big rebound - Inker is among a cohort of investors making money in this year's volatility spiral.

The long-time skeptic of the US bull run is sitting on a 4% gain in his benchmark portfolio, beating most of his peers thanks to outsized bets on cheap shares and equities around the world, from Japan to Europe. The international positioning looks smart, for now. The average daily swing in US stocks and bonds has just jumped to levels unseen since the disruptive days of the Federal Reserve's inflation-fighting campaign.

"This does feel pretty violent, mostly because the market had been pretty tame for a couple of years," the 54-year-old co-head of asset allocation at Grantham Mayo Van Otterloo said in an interview, in the aftermath of the more than $5 trillion equity rout. "I'm very sympathetic to what the market is doing."

The Boston-based manager is benefiting from trade war-disrupted markets that in the past seemed impervious to concerns about spiraling valuations and concentration. Hedge funds, retail speculators and retirement balances have taken hits, even accounting for days like Friday, when the S&P 500 staged its biggest bounce from a loss in seven months. But for a cohort of long-time skeptics of the tech-fomented bull run - like Inker's peers in international equities and value investing - it's been a market to be relished.

Volatility Spikes Amid Trump Uncertainty
Price swings in stocks, Treasuries reach widest since 2023

Wild rides are a regular feature of Wall Street. Still, what strikes market pros is how unique this moment feels. Much of the trading action can be ascribed to just one variable: Donald Trump.

Indeed, the market impact of Trump's early days in office is by some definitions historic, at least in the lens of a new presidency. Amid mounting concern about tariff threats and government firings, US stocks just posted their worst start for new administration since the global financial crisis. The dollar is headed for its biggest post-inauguration loss since Richard Nixon began his second term in 1973.

All that made for another bruising week across assets, with the S&P 500 on Thursday capping a 10% plunge that took just 16 sessions - before a Friday rebound. Credit markets also started to confirm the growth angst as junk bond spreads widened. The US dollar was hit for a second week, extending its March loss to 2.5%.

Another lens into the gyrations comes from Citigroup Inc. Its gauge of global risk, which analyzes the implied volatility of 22 cross-asset ETFs, is at the highest since 2022.

Global Cross-Asset Pricing of Risks Is Highest Since 2022
Citi's global risk factor analyzes volatility across 22 global ETFs

It was a different story just a few weeks ago. Stocks were churning record after record, junk bond spreads were the tightest since 2007, and Bitcoin was above $100,000. Roughly one third of the S&P 500 was concentrated in seven stocks, a level of concentration with no precedent.

That excesses like those should be unwound - whatever the reason - strikes many Wall Street skeptics as a long time coming. And the risk-off retreat smells like opportunity to Jeff Muhlenkamp, whose $230 million Muhlenkamp Fund has bucked the broad market rout to eke out a gain this year. He's looking to scoop up bargains in the chip-making and chemical industry.

Muhlenkamp notes that with the S&P 500 trading at 27 times reported earnings in January, Trump inherited one of the highest-priced stock markets in history. In his view, it was one that was ripe to be sold, when uncertainty started building around the president's policy agenda and China emerged as a threat to America's dominance in artificial intelligence.

"The market was very expensive anyway and all this uncertainty is going to make people nervous," Muhlenkamp said. "So they're going to pull back a little bit. They're not as levered as they were. And that's a very healthy thing."

Volatility Spiral
It will also do down as a week in which wary traders took cover in havens again, like gold and government bonds. The precious metal has rallied 10% since Trump's January inauguration - the best start to a presidential cycle since Jimmy Carter's term began in 1977. Treasuries are up 2.5% over the stretch, a gain not seen at this time of a cycle since Bill Clinton in 1993.

The persistence of the volatility has market watchers, for weeks, waiting for a so-called "Trump put," in which the president intervenes to stem further losses or calm volatility. Yet for now, sentiment remains frail, with faith in the oligarchy of American tech giants getting stress-tested.

All this is a boon for fans of foreign stocks, which for more than a decade have paled in comparison to the roaring Magnificent 7. At Morgan Stanley Investment Management, Jitania Kandhari is among those finally benefiting from a rotation out of that group.

"US concentration was up, valuations were extended," said the deputy CIO of the solutions and multi-asset group, who co-overseas the Passport Overseas Equity Portfolio. "It did feel like you could have a correction."

Bloomberg