Trump Trade bets sink 16% as Iran war, tariffs upend bets

Not all Trump-related ETFs are underwater. The Point Bridge America First ETF, ticker MAGA, dropped less than the broad U.S. stock market in March at the start of the Iran war and has stayed higher for the year.

"The Iran war is causing some concern around energy prices," said Hal Lambert, founder of Point Bridge Capital. While that has posed a challenge for reshoring themes in the near term, "there's a lot of energy in the MAGA ETF" and that has helped the fund more or less match the S&P 500's performance, he said.

A separate problem: investors are finding it harder to parse the White House's policy strategies and their eventual implementation. Since Trump was sworn in, stock investors have had to follow a stream of social-media posts and executive orders and chase potential winners and losers tied to them, only to see the president walk back plans or change tack.

"There's always something – the Iran war, the tariffs," said Michael O'Rourke, chief market strategist at JonesTrading Institutional Services. "It's to the point that investors are just shutting these policies out the best they can, because they really can't handicap them."

The latest source of uncertainty is the Trump administration's move this week to replace the expired 10% global tariff on goods entering the U.S. with targeted actions under Section 338 of the Tariff Act of 1930. Trump also hit Canada with 50% tariffs on a range of products this week, including beer, wine, paper and hockey sticks. Other countries are expected to see additional targeted Section 338 tariffs, with China and Europe as the next likely targets, TD Cowen analyst Chris Krueger wrote in a July 20 note.

"Now is really not the time to be pressing this" while inflation and oil prices are elevated and investors are concerned that corporate margin expansion could slow, said Mark Malek, chief investment officer at Muriel Siebert. He added that the stock market has already rallied despite the Strait of Hormuz being shut as a result of the Iran war, using up its one "get-out-of-jail card."

Some diehard backers of the president think it would be a mistake to abandon the trade now. Point Bridge Capital's Lambert, a longtime Republican who served on the inaugural committee for Trump, said the president's policies will still create winners.

"It's a long-term play," he said. "You don't build a manufacturing facility overnight."