The Trump effect, When technical signals collide with political volatility.

In the lexicon of technical analysis, few indicators attract more attention than the golden cross and the death cross. These signals, both based on moving averages, are simple in structure but rich in implication. A golden cross occurs when the 50-day moving average crosses above the 200-day moving average, typically interpreted as the beginning of a bullish trend. Conversely, a death cross takes shape when the 50-day average crosses below the 200-day, widely viewed as a bearish inflection point.

Though these patterns are lagging indicators by nature, confirming trends rather than predicting them, they still command influence among traders and institutional investors alike. Over the past two decades, the S&P 500 has exhibited these crossovers at critical market junctures: in December 2007 ahead of the global financial crisis, in April 2009 during the early stages of recovery, in March 2020 as the pandemic-induced crash unfolded, and again in July of that year as stimulus and liquidity efforts drove a rapid rebound. The signals themselves do not cause markets to move, but they crystallize momentum shifts already underway and serve as touchpoints for narrative alignment.

April 2025: a death cross delayed by politics

Earlier this week, markets once again approached the edge of a new death cross. The S&P 500’s short-term momentum had been fading for weeks amid a confluence of factors: persistent inflationary pressures, signs of consumer fatigue, and rising uncertainty around monetary policy. The 50-day average drifted dangerously close to falling below the 200-day average, raising alarms for market technicians and volatility-sensitive funds.

Then, unexpectedly, former President Donald Trump announced a 90-day suspension of most new tariffs, excluding a sharp increase in tariffs on Chinese imports, which were raised to 125 percent. This sudden policy pivot sparked a dramatic reversal in investor sentiment. On April 9, the S&P 500 surged by 9.5 percent, its largest single-day gain in over a year, as markets recalibrated expectations around trade disruptions and inflationary risk. The following day, however, the index dropped 3.5 percent, underscoring the instability of sentiment and the reality that temporary relief does not equal long-term clarity. Technically, the market avoided the death cross for now. But structurally, the rally exposed the fragility of a market still heavily driven by headline risk.

The Trump effect

Donald Trump’s capacity to move markets is not new. During his presidency, his influence on investor behavior often superseded traditional indicators. His election in 2016 triggered a sharp rally, dubbed the “Trump Bump,” fueled by expectations of corporate tax reform and deregulation. In 2017, the passage of the Tax Cuts and Jobs Act provided further fuel to the bull market, while repeated tariff announcements in 2018 and 2019 induced sharp, sudden corrections. His unexpected pronouncements, sometimes via tweets, created a new category of risk: political volatility as an asset class.

This pattern continued into 2020. The market’s violent selloff during the onset of the COVID-19 pandemic coincided with, and was amplified by, confusing policy communication and a travel ban announcement that blindsided markets. In each case, Trump’s interventions had the power to override technical setups. Price action would detach from momentum readings, volatility measures would spike independently of historical precedents, and the usual cause-and-effect frameworks would break down. In short, the presence of Trump introduced a variable that most technical models were not built to handle: the abrupt rewriting of market expectations through non-market mechanisms.

The limits of technical analysis in a politicized economy

The near-death cross of April 2025 serves as a timely reminder that technical analysis has its limits. Moving averages and trendlines offer a structured view of market momentum, but they cannot account for sudden changes in fiscal policy, geopolitical escalations, or leadership volatility. In a world where markets are increasingly responsive to non-economic catalysts—be they tweets, press conferences, or executive orders, relying solely on technical patterns risks misdiagnosis.

That is not to say that technical analysis is obsolete. Rather, its utility must be reframed. In today’s environment, technical signals should be seen not as predictive instruments, but as contextual markers, signposts that provide structure in the absence of news, but which must yield when macro or political variables overwhelm trend dynamics. Analysts who treat a golden cross as a buy signal in isolation, or who exit positions automatically at a death cross, risk missing the larger picture: the market is no longer governed solely by earnings and rates. It is governed also by narrative, leadership credibility, and geopolitical posture.

The new reality for market practitioners?

In a rational, rules-based market, a death cross would suggest a cooling of sentiment and potential for extended downside. But in a world where policy reversals can materialize overnight and personalities can shift the arc of investor confidence, that same signal can become meaningless in a matter of hours. This is not a critique of technical analysis; it is an acknowledgment of its limits in the current cycle.

The message for investors is not to discard technicals, but to integrate them into a broader interpretive framework, one that includes political developments, policy volatility, and the unpredictability of influential figures like Donald Trump. The market did not avoid a death cross in April because of a shift in economic fundamentals. It avoided it because of a single headline that, for 24 hours, changed the emotional posture of global capital.