For months, the global markets have been ridden by the rollercoaster ride that has been the “Trump trade“. The phenomenon, characterized by the confluence of a strong US economy, a surprisingly weak dollar, and the unpredictable nature of President Trump’s economic policies, has had a profound impact on global markets. However, as the trade tensions between the US and its partners continue to simmer, and the world’s central bankers gather for their annual summit, it’s becoming increasingly clear that the “Trump trade” is winding down, and the Federal Reserve’s rate plans are once again taking center stage.

The “Trump trade” was born in late 2016, when the surprise victory of Donald Trump sparked a wave of optimism among investors about the prospects for the US economy. The idea was that Trump’s proposed tax cuts, deregulation, and infrastructure spending would unleash a wave of economic growth, and the corresponding increase in inflation would lead the Federal Reserve to raise interest rates more aggressively. As a result, the US dollar would weaken, and other currencies would benefit, leading to a boost in global trade and investment.

While the US economy did experience a strong surge in growth in 2018, the expected inflation hike never materialized, and the Fed’s rate hike pace was slowed. The dollar’s weakness also began to wane, as investors realized that the Fed was not going to raise rates as quickly as expected. The resulting “Trump trade” phenomenon saw investors piling into stocks, particularly those with international exposure, as well as the currencies of emerging economies, such as the Chinese yuan and the Mexican peso.

However, as the year has progressed, the “Trump trade” has begun to unwind. Trade tensions between the US and its major partners, including China, the European Union, and Mexico, have risen, and the outlook for global trade has become increasingly uncertain. The US has imposed tariffs on billions of dollars’ worth of goods, and the retaliatory measures from its partners have sparked concerns about the impact on global economic growth.

Meanwhile, the Fed’s stance on interest rates has become increasingly hawkish. The central bank has raised rates three times in 2018, and officials have indicated that they are likely to continue doing so in the coming months. This has led to a renewed focus on the Fed’s rate plans, as investors look for clues on the direction of monetary policy.

In this environment, the “Trump trade” is no longer the driving force behind market movements. Instead, investors are focusing on the Fed’s rate plans, as well as the outlook for global trade and economic growth. The US dollar has begun to strengthen, as investors seek the safety of the dollar and other yield-rich assets, such as US treasuries. The currencies of emerging economies, which had benefited from the “Trump trade”, have also come under pressure.

In conclusion, the “Trump trade” is indeed winding down, and the Fed’s rate plans are taking center stage. As investors look for clarity on the direction of monetary policy, the global economy, and the outlook for trade, the “Trump trade” is likely to continue to unwind. The implications for markets and the economy will be significant, and investors will be watching the Fed’s every move, as well as the twists and turns of global trade tensions.