We’ve written about the Trump trade, the “sell America” trade, and the Trump Always Chickens Out (TACO) trade—all trends that have taken hold among institutional investors and retail traders alike after President Trump was elected.

It's no wonder that a huge factor dictating how bullish or bearish an investor really is comes down to their political leanings, the Wall Street Journal reported.

For investors who are critical of President Trump, Liberation Day and the ensuing market turmoil was seen as a harbinger of things to come, and many opted to move out of US stock markets altogether. Yet many proponents of President Trump are far more bullish on the state of the economy and American businesses.

According to an April Gallup poll, 59% more Democrats than Republicans expected stocks to crash over the next six months, while 47% more Republicans than Democrats forecast a market boom—the largest partisan gap ever since Gallup began tracking the data in 2001.

Increasingly divided investors are also picking different investment funds. A partially politically motivated backlash against ESG investing has pushed the practice nearly to extinction. Meanwhile, a slew of new ETFs aimed at capitalizing on an investor’s political leanings, for instance, or mimicking specific politicians' trades, have risen to the fore.

Politics and investing don’t mix

Pretty much any analyst you ask will tell you not to base portfolio decisions on who’s in office. After all, the stock market tends to go up no matter which party is in charge, and the sectors that boom under a certain president can be counterintuitive to their party’s policies.

The S&P 500’s recovery since Liberation Day seems to prove that point. The White House has paused, reversed, and compromised on many tariffs, contributing to the market’s comeback. Investors who dumped stocks after the initial tariff announcement worried about what the president would do next have missed out on the gains.

The big picture: According to data compiled by Paul Hickey, co-founder of Bespoke Investment Group, $1,000 invested in the stock market 70 years ago would be worth about $2 million today. But if you stayed in the market only when a Democrat is president, that number would only be $72,000. Staying invested only during Republican administrations would leave you with just $28,000.

In other words, don’t let short-term political chaos thwart your long-term gains.—LB

🟢 What’s up

• The wait is finally over: US Steel climbed 5.10% after President Trump signed an executive order approving its takeover by Nippon Steel.
• Roku jumped 10.43% after announcing a partnership with Amazon that gives advertisers the ability to reach roughly 80% of American households with connected TVs.
• Advanced Micro Devices rose 8.81% on an upgrade from Piper Sandler analysts, who think the semi stock’s AI business will boom.
• EchoStar exploded 49.11% after Trump pushed the FCC to resolve its ongoing spectrum dispute with the satellite company.
• Victoria’s Secret rose 2.36% on reports that the struggling retailer has attracted the attention of an activist investor.
• Sage Therapeutics soared 35.37% on the news that it will be acquired by Supernus Pharmaceuticals in a $795 million deal.
• MGM Resorts climbed 8.10% after the casino company revealed that its Bet MGM online gambling platform is expected to pull in more revenue than previously thought.
• Kering, the parent company of Gucci, Yves Saint Laurent, and other luxury brands, popped 12.37% on the news that it has convinced Renault’s CEO to run the company.

What’s down

• Sarepta Therapeutics plunged 42.12% after the pharma company reported a second death of a patient taking its Duchenne muscular dystrophy treatment Elevidys.
• Reports that Iran wants to end hostilities pushed oil prices lower this afternoon, hurting shares of energy stocks like APA Corp (down 2.43%), Devon Energy (down 1.45%) and ConocoPhillips (down 2.02%).

Concerned about what geopolitical upheaval means for your portfolio? Don’t worry, retail investors will once again save the day.

According to Goldman Sachs, American households own 38% of the US equity market. When you combine that with indirect ownership via ETFs and mutual funds, average Joes are actually a pretty important part of the stock market.

That’s why it’s a good thing they’re so bullish: Goldman Sachs says that if the economy remains healthy, it expects households to purchase a whopping $425 billion worth of US equities in 2025. Analysts think that should provide stocks with a nice level of support even in the face of market turbulence, reviving the TINA (there is no alternative) trade.

Analysts also noted that a big part of investor support will be due to heavy inflows into US equities via 401(k) accounts. “Within 401(k) plans, the average allocation to equities has grown from 66% in 2013 to 71% in 2022 and has been especially pronounced for participants in their 20s (76% to 90%),” they wrote.

Wall Street is calling 911 on Section 899.

The little-known provision in the One Big Beautiful Bill Act targeting foreign investments is alarming investors and businesses alike. Section 899 is dubbed a “revenge tax” for a reason: It’s an extra charge on nations the White House says have “unfair foreign taxes” on American businesses.

The policy is essentially a tax on foreign capital—and it’s not a small one. If passed, the measure would enable the US government to raise the tax rate on businesses in so-called discriminatory countries by 5% each year, with a capped increase at 20% above the baseline rate, which could raise up to $100 billion over a decade.

"Buy American" gets expensive

Critics argue the tax would make holding US assets more expensive for foreign investors, which could push them to pull their cash out of domestic assets and invest overseas instead. That would be a huge blow for the US economy, especially at a time when the “sell America” trade has already been picking up momentum.

In an interview with Bloomberg, Allianz CIO Ludovic Subran argued the provision could catalyze a 5% plunge in the dollar, a 10% selloff in stocks, and half--point jump in Treasury yields.

But it isn't just pro investors who are worried about the tax. A report from the Global Business Alliance, a trade group which includes firms such as Toyota and Volkswagen, estimated that Section 899 could result in 700,000 American jobs lost, with the majority of losses in states like South Carolina and Tennessee, as well as an annual $100 billion hit to GDP.

Borrowers could also be hurt, as foreign lenders opt not to do business with American companies due to the bill.

How to invest

While there’s plenty of fear around Section 899, some analysts note that the pain won’t be felt by every stock on the market.

“The direct impact from Section 899 is more pronounced for US subsidiaries of foreign companies than for US companies,” explained JPMorgan analyst Nathaniel Rosenbaum in a note last week. “The provision over the medium-longer term should favor large US multinationals, but high dividend sectors and industries could be disadvantaged (e.g., Financials, Staples, Energy, Utilities, REITs, BDCs).

Emerging markets could also benefit if foreign investors sprint for the exits. In fact, they’ve already been one of the biggest winners of the “sell America” trade, according to Bloomberg.—LB

• President Trump reported over $600 million in income and assets worth over $1.6 billion.
• Trump is planning to make more money selling a new mobile phone plan and $499 smartphone.
• The G7 Summit begins today, as does the Paris Air Show.
• Oracle co-founder Larry Ellison is now the second richest person on Earth.
• China’s retail sales soared in May, though industrial output slowed.
• Meta Platforms is bringing advertising to WhatsApp.

We’ve got a quiet few days on the economic calendar…except for tomorrow. That’s when investors get hit with a few reports covering different parts of the economy all at once, including:

• US retail sales: Exactly what it sounds like, this report will give us some details about the state of US shoppers. With inflation rising moderately over the last month, hopes are high that people are still spending big bucks and keeping the economy on track. Any numbers that show otherwise could be a real problem for investors.
• Homebuilder confidence: This monthly survey serves as a barometer of the US housing market, which is in a pretty weird place right now.
• The import price index: A gauge of how US imports compared to exports, and an important measure of how international trade is faring with all the tariff turmoil these days.

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