Wall Street’s bet on American economic primacy is collapsing under the weight of a foreign policy quagmire, as exchange-traded funds tied to domestic manufacturing and energy independence suffer double-digit losses. The Ned Davis Research Trump Trade Index, a basket of 12 ETFs linked to re-shoring and defense, has plunged roughly 16% since May despite crushing the S&P 500 earlier this year. The reversal shatters the narrative that a protectionist trade agenda alone can insulate American markets from geopolitical instability, leaving retail and institutional investors holding the bag.
Warflation Reverses Industrial Gains
Strategists point directly to the administration’s war with Iran as the catalyst for the sell-off. The conflict has spiked energy prices, dragging inflation expectations and interest rates higher while strengthening the U.S. dollar—a triple headwind for capital-intensive domestic industries. Funds like the VanEck Rare Earth and Strategic Metals ETF, which posted 20% gains in the first quarter, have flipped into negative territory for the year. “All this is tied to the Iran war and inflation,” Pat Tschosik, chief thematic strategist at Ned Davis Research, said. “Between some sort of tariff, or war, or supply chain disruption, could we just go three months without some sort of supply shock?”
The data exposes the fragility of the “America First” trade. While economic nationalism aims to uncouple American prosperity from globalist supply chains, the immediate reality shows that shooting wars in the Middle East still devastate the domestic industrial base by eroding consumer purchasing power and spiking input costs. The Global X Uranium ETF and Global X Defense Tech ETF have similarly surrendered their earlier advances, as the anti-war admonishment to avoid foreign entanglements rings hollow after the fact.
“Investors who saw Trump as a champion of US manufacturing, heavy industry and working-class consumption suffered.” — Matt Gertken, BCA Research Inc.
Flight to Safety Abandons Nationalist Picks
Capital flows confirm a steady exodus from the re-shoring narrative. The Truth Social God Bless America ETF (ticker YALL), heavily weighted in energy, industrials, and financials, has shed assets consistently since the war began, dropping over 4% in a year where the S&P 500 advanced roughly 8%. Notably, the fund never held shares in its namesake social-media company, parent Trump Media & Technology Group, which has cratered to record lows and remains down 35% year-to-date—a dual rebuke of the media and manufacturing strategy.
One outlier has been the Point Bridge America First ETF (ticker MAGA), which roughly matched the S&P 500’s performance. Founder Hal Lambert credits the fund’s heavy energy exposure for absorbing the blow, acknowledging that “the Iran war is causing some concern around energy prices” but that the domestic energy holdings provided a buffer missing in pure-play industrial funds.
Market strategists note that policy whiplash has exhausted investors who attempted to track executive orders and tariff pronouncements, only to witness walk-backs and tactical shifts. “It’s to the point that investors are just shutting these trades down,” observed Michael O’Rourke, chief market strategist at JonesTrading. The outcome forces a reckoning: a nationalist economic agenda, divorced from energy independence abroad, fails the American worker by delivering inflation rather than insulation, and leaves the domestic industrial base as a casualty of a foreign war opposed by much of the electorate.