Markets force Trump's hand again as oil tumble validates strategy: Robin Brooks

[President Trump Participates In A Saving College Sports Roundtable In The East Room]
Anna Moneymaker/Getty Images News

Robin Brooks of the Brookings Institution argued Tuesday that successfully trading the Trump 2.0 era requires recognizing one consistent pattern: when markets reach extreme levels, they force the administration to reverse course.

This dynamic unfolded with elevated China tariffs in April 2025, and Brooks believes it repeated last week with Iran. Just as oil prices surged past $100 per barrel, President Donald Trump declared the conflict with Iran “almost over,” sending Brent crude (CO1:COM [https://seekingalpha.com/symbol/CO1:COM]) down to $90.

The inherent unpredictability of this presidency—spanning foreign policy reversals to IEEPA tariffs struck down by the Supreme Court—makes trend-chasing a losing strategy, according to Brooks. He recommends instead focusing on secondary opportunities, particularly the growing differentiation among emerging market currencies.

Despite the recent pullback, Brent remains 24% above pre-war levels—a substantial shock that hasn’t been fully reflected in emerging market valuations. Brooks identifies commodity exporters as the clear beneficiaries: Brazil (EWZ [https://seekingalpha.com/symbol/EWZ]) (BRL:USD [https://seekingalpha.com/symbol/BRL:USD]) and South Africa (EZA [https://seekingalpha.com/symbol/EZA]) (ZAR:USD [https://seekingalpha.com/symbol/ZAR:USD]) have posted the strongest currency gains, with Australia (EWA [https://seekingalpha.com/symbol/EWA]) (AUD:USD [https://seekingalpha.com/symbol/AUD:USD]) and Canada (EWC [https://seekingalpha.com/symbol/EWC]) (CAD:USD [https://seekingalpha.com/symbol/CAD:USD]) leading among G10 nations. This pattern echoes market behavior following Russia’s invasion of Ukraine.

On the other side, commodity importers including Thailand (THD [https://seekingalpha.com/symbol/THD]) (THB:USD [https://seekingalpha.com/symbol/THB:USD]), the Philippines (EPHE [https://seekingalpha.com/symbol/EPHE]) (PHP:USD [https://seekingalpha.com/symbol/PHP:USD]), and India (INDA [https://seekingalpha.com/symbol/INDA]) (INR:USD [https://seekingalpha.com/symbol/INR:USD]) face the steepest challenges from persistently elevated energy costs.

Brooks maintains this differentiation trade has further to run, especially in chronically undervalued currencies like Brazil’s real. As risk appetite normalizes and repatriation flows ease, he also expects broader dollar (DXY [https://seekingalpha.com/symbol/DXY]) weakness to emerge.

Market-moving funds: (DIA [https://seekingalpha.com/symbol/DIA]), (DDM [https://seekingalpha.com/symbol/DDM]), (DOG [https://seekingalpha.com/symbol/DOG]), (DXD [https://seekingalpha.com/symbol/DXD]), (SDOW [https://seekingalpha.com/symbol/SDOW]), (SPY [https://seekingalpha.com/symbol/SPY]), (VOO [https://seekingalpha.com/symbol/VOO]), (IVV [https://seekingalpha.com/symbol/IVV]), (RSP [https://seekingalpha.com/symbol/RSP]), (SSO [https://seekingalpha.com/symbol/SSO]), (UPRO [https://seekingalpha.com/symbol/UPRO]), (SH [https://seekingalpha.com/symbol/SH]), (SDS [https://seekingalpha.com/symbol/SDS]), (SPXU [https://seekingalpha.com/symbol/SPXU]), (QQQ [https://seekingalpha.com/symbol/QQQ]), (QQQM [https://seekingalpha.com/symbol/QQQM]), (TQQQ [https://seekingalpha.com/symbol/TQQQ]), (QID [https://seekingalpha.com/symbol/QID]), and (SQQQ [https://seekingalpha.com/symbol/SQQQ]).

Oil ETFs: (USO [https://seekingalpha.com/symbol/USO]), (UCO [https://seekingalpha.com/symbol/UCO]), (DBO [https://seekingalpha.com/symbol/DBO]), (OILK [https://seekingalpha.com/symbol/OILK]), and (USL [https://seekingalpha.com/symbol/USL]).

DEAR READERS: We recognize that politics often intersects with the financial news of the day, so we invite you to click here [https://seekingalpha.com/article/4876904-politics-and-the-markets-031026] to join the separate political discussion.

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