The Financial Times (FT) reported Tuesday that mere hours before Donald Trump was re-inaugurated as US president last week, Goldman Sachs hosted its annual investment summit in London. A dominant theme among attendees—particularly hedge funds and speculative investors—was the dollar, a focal point of the so-called "Trump trade."

According to FT, while Trump's economic agenda remains challenging to predict, many investors appeared confident that his presidency signals a strong dollar. This belief stems from expectations of US exceptionalism, stubborn inflation, or both. One of Goldman’s senior traders described the trade on the dollar—particularly against the Chinese renminbi—as “the most obvious trade in the world.”

However, the report notes that Trump's fiery rhetoric during his inauguration challenged this assumption. Revisiting his campaign focus on tariffs, Trump targeted Mexico and Canada instead of China, his previously stated primary economic rival. This unexpected shift led to a sharp rise in the Chinese renminbi and caused the dollar to weaken against major currencies, including the euro, yen, and sterling.

The FT report underscores growing challenges for investors banking on Trump’s second term. US markets were motivated by Trump’s promises of deregulation, lower taxes, and prioritizing American goods, with an added boost from the country’s dominance in artificial intelligence (AI). 

Rise of 'DeepSeek'

According to the report, China's new AI initiative, "DeepSeek," disrupted market sentiment, triggering a massive sell-off in US tech stocks, including an unprecedented $600 billion loss in Nvidia's market value in a single day.

The FT report highlights the fragility of the US stock market’s reliance on a handful of tech giants. French bank Société Générale noted that seven AI-linked US companies alone account for one-third of the S&P 500 index. Without Nvidia and its top customers—Microsoft, Google, Amazon, and Meta—the index would be roughly 12% lower.

Analysts are recommending diversification. “Tilting towards an equal-weighted S&P 500, rather than the tech-heavy version, makes sense,” said Manish Kabra, head of US equity strategy at Société Générale.

European stock markets in Germany and the UK have hit record highs since Trump’s return, showing opportunities outside the US. However, the FT warns that any major challenge to US Big Tech could shake global markets.

The weakening dollar and volatile US equities have raised doubts about the reliability of the so-called "Trump trades." The report warns that investors counting on a strong dollar, dominant US tech, and global market dominance will face a bumpy ride in the era of Trump 2.0.