BREAKINGVIEWS-Trading Trump will be even harder in year two

By Stephen Gandel

NEW YORK, Jan 20 (Reuters Breakingviews) - Investors' confidence in an erratic political leader went about as well as could be expected. Prison operators and fossil-fuel extractors were among the most hotly anticipated stock-market beneficiaries as Donald Trump prepared to re-enter the White House. They turned out to be two of the worst-performing industries. As the U.S. president takes a sledgehammer to the world order underpinning the country's dominance, it will be twice as hard to make money by trying to interpret policy.

Few things played out as predicted after Trump took office exactly one year ago. U.S. tariffs didn't do the damage many foresaw, leaving market prognosticators wrong-footed yet again, as they were when oil and gas shares more than doubled under renewable-energy champion Joe Biden and healthcare companies defied the odds under Barack Obama. Similarly, GEO Group GEO.N, a correctional facility builder, has lost nearly 50% of its value and energy giant ConocoPhillips COP.N 8% since Trump's return.

Instead, Big Tech has benefited. Artificial intelligence contributed to seven of the 10 best performances among S&P 500 Index constituents over the past 12 months. Hard-drive manufacturer Western Digital led the way. Entertainment empire Warner Brothers Discovery WBD.O also thrived, thanks to a $100 billion bidding war being waged by Netflix and Paramount Skydance at least partly because of the administration's looser approach to trustbusting.

Even when it comes to M&A, however, Trump meddles in unpredictable ways that trip up investors. His United States Steel golden share is a case in point, while deals involving railway operator Union Pacific UNP.N and TV broadcaster Tegna TGNA.N continue to hang in the balance. Big U.S. banks also rallied thanks to laxer regulation, but the president's recent call to cap credit-card interest rates at 10% caught many observers off-guard. A thawing relationship with JPMorgan JPM.N CEO Jamie Dimon also may re-freeze after the president threatened to sue the mega-lender for allegedly discriminating against him after the January 6, 2021 protests on Capitol Hill.

Aggression against Greenland, Venezuela, Iran and allies in Europe is the latest geopolitical development to tempt the search for alpha. Good luck with that, as it becomes harder to tell just how much Trump’s mercurial efforts to upend the United Nations and NATO will erode a peace dividend that fortifies U.S. markets and the dollar’s reserve-currency status.

Strategists at Goldman Sachs GS.N, for one, recommend deglobalization investments, such as U.S.-focused manufacturers and defense contractors, along with gold. As with the many and varied ideas espoused by money managers last January, there is sound logic behind the choices. And inevitably, Trump will render many of them spectacularly wrong.

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CONTEXT NEWS

The S&P 500 Index has gained nearly 15% from January 20, 2025, when Donald Trump was inaugurated for his second term as U.S. president, through January 16, 2026.