Trump's tariff headlines have dominated the news cycle and shaken asset markets, but which stocks are taking the biggest hit?
Historically, NVIDIA (NVDA) has performed well during rate-cut cycles. Since 2001, NVDA's average 20-day return following a Fed rate cut has been +6.2%. However, despite entering another rate-cutting phase in early 2025, NVDA has underperformed significantly. The key reason? Each time Trump announced or hinted at new tariff measures, NVDA's stock price dropped sharply.
Importantly, the ISM Manufacturing Index remains above 50, signaling that the economy is still in expansion—not contraction—territory. This makes it clear that NVDA's recent underperformance is not driven by recession fears, but rather by the negative impact of tariff uncertainty on its stock.
Caterpillar (CAT), another stock closely tied to global trade, also showed repeated sell-offs during Trump’s first-term tariff announcements in 2018. However, CAT’s historical sensitivity to interest rates (-6.2% average return after rate hikes in 2018) complicates the interpretation. CAT's decline could be partially explained by monetary policy, while NVDA's recent performance points directly to the tariffs.
In short, NVDA's price action defies its usual rate-cut rally pattern, strongly suggesting that tariffs have become the dominant driver behind its recent weakness. Investors should take note that tariff risks may continue to weigh heavily on NVDA and similar trade-sensitive stocks.
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