The Trump Put: How Tariffs and Market Reactions Impacted ETFs

The "Trump Put" Phenomenon

• 💡 The concept of the "Trump put" suggests the president intervenes to support the stock market when it declines significantly.
• 🎯 This was seemingly confirmed when President Trump paused tariffs for 90 days (excluding China), leading to a substantial market rally.
• 📈 The S&P 500 and Nasdaq Composite saw significant gains following the tariff pause, demonstrating the market's sensitivity to presidential actions.

ETF Performance Amidst Volatility

• 🚀 ETFs experienced massive intraday moves, with the QQQ (Nasdaq 100) rising 12% in a single day, one of its best days on record.
• ⚡ The SOXL (3X Semiconductors ETF) surged over 50% in one day, marking its best return in its 15-year history.
• 💰 This volatility emboldened "dip buyers" and reinforced the idea that market timing is exceptionally difficult, especially when presidential actions can sway markets.

Market Cracks and Bond Market Illiquidity

• ⚠️ Early signs of illiquidity appeared in the bond market, with the Jaws ETF (JAWS) trading at a 1% discount, a hint of potential issues.
• 📉 Treasuries declining even as stocks fell was seen as a negative indicator, suggesting potential illiquidity in bonds.
• 🌊 However, these cracks were minor and quickly disappeared, with potential for premiums to emerge due to strong buying.

ETF Flows and Volume Analysis

• 📊 ETF investors, particularly "diamond hands" like Vanguardians and deens, continued to invest, with ETFs taking in $303 billion year-to-date.
• 📈 Equity ETFs had their best quarter in Q1, and the recent rally provided a boost, with expectations of further flow increases.
• 💥 Volume was exceptionally high, with SPY trading $127 billion on Monday, the largest day on record, indicating significant fear and adjustment activity.

Active Managers and Future ETF Trends

• 🧐 Active equity managers, tilted towards value and less on "Mag Seven" stocks, performed well before the rebound, but the rapid bounceback poses new challenges.
• 📉 Bond managers generally underperformed due to the sell-off in treasuries.
• 🌍 The prospect for ETFs outside of China (EMXC) looks potentially positive as the US market rebounds, though China's national team buying ETFs to support its market adds complexity.
• 💡 The market's reaction to tariff talk suggests that any future tariffs could be easily undone by presidential capitulation if markets decline, making it harder to attract assets.