US markets are now in a doldrum. Has Trump failed?

Where is the market headed?

Market Overview

The market has been flat now for almost five sessions. The closing has been within 50-100 points. So it is giving a feeling that the market doesn’t want to go further down, at least as of now. A flag-like formation is happening after this rise, which currently looks quite good. Nifty 50 is down 0.12% in the last two or three sessions, especially in light of the US markets collapsing and other global markets also not doing so well. It looks like the market is fed up of going down.

Nifty Next 50

Nifty Junior is also absolutely flat for the day. It did go down but recovered, just like yesterday. We opened gap down and closed in positive today. We went down during the day but closed back at 0.01%.

Nifty Mid and Small Cap

Mid-caps were down half a percent today, with wider variation in mid-caps but still pretty much in that ballpark. Small caps were down 0.2%, with nothing really lost big here as well. So small caps are also doing okay.

Nifty Bank Overview

Bank Nifty tried to go up but gave up some of the gains, closing at 0.42%. The scare of IndusInd Bank seems to be already behind us.

GOLD

Gold is absolutely flat. I think gold is waiting for some cue for a big move. Which way? I don’t know, but it does look like a flag formation and if that is true, we are looking at pretty high targets in that market.

Advanced Declined Ratio Trends

Breadth is not so good, but it didn’t really show on the indices. For instance, in the small-cap space, you had only 29 gainers versus 71 losers. Small-cap 50 was also skewed towards the sell side, but overall the indices didn’t show as much red.

Nifty Heatmap

The major red region was the IT sector, with Infosys losing 4% and Wipro 3.3%. These are big companies, and big cuts have been made, so large market caps have been lost. Besides ITC, other FMCG counters also lost big, such as Hindustan Unilever and Nestle, which were down 2.5%. Consumption stocks like Asian Paints were down 1.5%.

You also had Bharti Airtel down 1.2%. HDFC Bank, Kotak Bank, and these were the stocks that were pushing the index up today. In the Nifty Next 50 space, some Adani stocks, energy-related stocks, and some sporadic stocks like Divis Labs, Indigo, Jio Finance were also up. However, you had a reverse move in Lodha, which was gaining very smartly yesterday. L&T, Naukri, all IT-related stocks were getting smashed down. HAL, TVS Motors, Zydus Life, ICICI General Insurance were all down today.

Sectoral Overview

Sectoral trends show a decline of 2.9%. This week, we’ve lost 4.6%, and this month we have lost 13% on IT stocks. That is the highest loss for the last one month. Just a little behind is capital markets at minus 12%. For the last year, IT stocks are in the red. Very few sectors remain which have a more than a double-digit lead. But it’s all red for the three months and six months as well. IT, which is largely dependent upon the US markets as a marketplace, is feeling the shivers. More and more AI experts are coming on and saying that coding, for instance, will go extinct within a year, with human coding and other forms of coding being taken over by AI, at least the majority of it.

Sectors of the Day

Nifty IT Index

This will have a big impact on Indian IT companies, especially the larger ones that are not in very niche areas but are doing mass-market services. IT stocks have fallen from 46,000 to 36,000, which is a very big cut. If I showed you the longer-term chart, IT stocks net-net have not made anything over the last four years. So at least the large-cap IT stocks, Infosys, TCS, and even the IT index, have underperformed.

Story of the Day : Has Trump Failed ?

Trump has something to do with it for sure. The Trump move started sometime in October when it was clear that Trump was coming into office, and a lot of trends began at that point. Many of those trends have reversed, and many that went down are yet to reverse back up.

That is the irony of it all—if all trends were to revert back to October, then India would have been much higher, but that’s not the case. A new term has been coined: Trump’s session. Instead of the recession that is coming, economists are warning that $4 trillion have been wiped out from the market after Trump’s moves seemed not to be working. The US is on the brink of a downtrend, and there are concerns about economic uncertainty. If you shut down supply lines and impose a 50% tariff on steel coming from, let’s say, Canada overnight, you cannot create a replacement of that in the US. The domestic buyer actually has to pay much more. A lot of these regulations that are coming through or new policies are going to take a long time to come into practice, where they may eventually benefit the US. However, in the interim, they will hurt the supplier and the US buyer as well. Stock markets are in complete turmoil because every day Mr. Trump wakes up and dreams of what to do the next day in terms of targeting a country or sector. The unpredictability of that is basically the problem for the market, as markets don’t like uncertainty—they prefer a stable and predictable regime. That uncertainty shakes investor confidence and affects business dynamics.

Economists are also slashing forecasts amidst these trade conflicts, and financial markets are suffering losses because of the loss of confidence in this entire situation. Goldman Sachs has raised the probability of a US recession, although it is still low. JP Morgan Chase says it’s 40%, the government says 20%, and Fitch says the recession threat is real. While we may say that we’ve already fallen and whatever happens in the US should be ignored, that’s not the case. If the US hits a recession and takes a while to come out of it, the entire world will pay for it. So don’t be smug about the fact that we’ve already come down 15-20% and nothing worse can happen from here. That is not the case. The White House, however, remains optimistic, claiming that the market downtrends are temporary blips and that this is just a period of transition. Some people are also reading this narrative as if Trump wants the stock markets to go down, to force the Fed to make significant cuts on interest rates because a huge amount of debt is going to roll over in the next six months. At the current interest rates of nearly 4.2% on 10-year bonds, rolling over that debt to the next 10-year period is going to be expensive. But if they can bring down the interest rates, the rollover cost will decrease. So there is a conspiracy theory that this is being motivated by the desire for stock markets to come down.

Right now, the dollar index has been falling. As soon as Trump was known to be coming into office, the dollar index rose from 100 to 110, and now it has started to unravel, with the index already down to 103. This entire cycle is going to get completed if we keep going further down. This reversal of the dollar moving into the US is happening. It is likely that foreign investors may not have as much of an intent to keep selling in India, and buying may eventually come back. S&P 500 and NASDAQ’s recent performance has been poor. Since October, we are down 3.5%, and since the election results, there’s been a 9% drawdown. The S&P 500 index is now pretty much at the same place where it was in July. So American investors are also hurting. Some Indian investors might take comfort in that, thinking it’s all okay because everyone’s hurting. Nasdaq’s recent performance is also showing a sharp downtrend, from around 22,500 to 19,500, which is a 12% drawdown. US tech stocks like Tesla, which had gone up from $250 to almost $500, are now back down to below where they started post the October journey, showing a 53% drawdown.

Amazon is also down 20%, after a 34% rise. Meta is down 20%, and Microsoft is down 16%. Many stocks are below their election-day levels, including Alphabet, which is down 20%. Many indices that had gone up have now not returned either. For example, EU stocks, like those in Germany, have benefited and are up, not experiencing the same drop as US markets. The UK, however, has fallen, but it’s only 2.5% above since October. Most of the gains have been given up. The Financial Times has also reported that Trump’s trade policies are not really working for America. However, Germany has benefited from this narrative, and the Euro has rebounded to its four-month high against the dollar. So the decline in the dollar index is a real thing happening across markets.

India, of course, has been losing since October, and while this coincided with Trump’s announcement or expectation of him coming into office, the trend in India has not changed. However, this trend may change now as global markets, which were going up, have started coming down. Hence, a reversal trade for India is very much possible as and when it happens, though we are not seeing signs of that just yet. China has been completely flat since October. While India got badly hurt, China really hasn’t moved since then. Russia, on the other hand, has done well. So we are very specific in terms of our markets not doing well. Japan is down about 5% since October, along with other trade assets like meme coins and cryptocurrencies, which had rallied hard after Trump’s announcement. For example, the Millennium Meme Coin and Official Trump Coin are down 90% and 75% from their peaks. Trump Media stock itself is down 50%. Tesla is down 53%, Bitcoin is down 22%, and S&P 500 is also down. This entire trade built on the back of President Trump has collapsed.

Private equity and credit stocks like Blackstone and KKR have also fallen 20-30% since January 2020. Essentially, nobody has confidence that the steps being taken in the White House will benefit the American market or anyone else.

If we look at momentum, investing based on headlines is like chasing shadows. By the time you act, the opportunity is gone, and if you don’t have an exit plan, profits are just paper gains. For instance, if you had bet big on the American market when the President came into office, you would have lost big. Bitcoin was gaining big time before the President’s announcement, but post-announcement, it slumped. Narratives often only help sellers find good buyers to exit, and buyers get stuck without an exit plan.

Key takeaways: News-driven trades are lagging trades. Always follow the price. If the price is telling you that the trade is coming off, get out of it. If the price is telling you that the trade is building, get into it. Headlines can often cross with the price trend, and many times, you will see good news, but the price is coming down. For example, right now, the good news is that America is going to become great again, but prices are coming down. Hype fades, and reality remains. Stocks that rally on political or economic narratives can correct just as fast, as seen in the case of Tesla, where it went from $250 to $500 and back to $250.

Finally, no exit plan means no profit. Entering a trade without any strategy makes investing into gambling. And that’s where we are. There is complete global turmoil. Trump has, I would say, disturbed the equilibrium of the markets. America is against Europe, against Mexico, against Canada, and has a very strange policy against India. India doesn’t know where to go or what to do. Our ministers couldn’t break through any negotiations, and now they are sending JD Vance, a tough negotiator, to India next month. Tariffs between the two countries are still unresolved. There is complete uncertainty and chaos. In such situations, no predictions or forecasts will work. Just keep following price. If the price tells you something is working, stick with it. If it stops working, get out of it. That’s the most sane way of working. For instance, gold is currently showing no problem, as it stays near its highs. Stability is seen there. Stocks, however, are telling you to get out or move into defensive stocks.

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