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Takeaways
- Stocks have swung wildly during President Trump's first 100 days, with the White House's unpredictable tariff policies leaving companies and investors unsure about the economic outlook.
- Treasury yields and dollar have declined due to recession risks increasing and global investors’ soured on U.S. assets.
- In the midst of market turmoil, investors have sought refuge in gold, a safe haven. There are also indications that some investors may have sought refuge in bitcoin.
Trump campaigned to shake up the status quo. His first 100 days on Wall Street have been a whirlwind.
Since Trump’s inauguration, stocks have been on an incredible ride. The S&P 500 endured one of its worst sell-offs in decades earlier this month after Trump unveiled his “Liberation Day” tariffs on April 2. Stocks rallied the most since 2008 a week after Trump announced a 90 day pause on many of these duties.
The Cboe Volatility Index, also known as the “fear index”, closed at its highest level in March 2020 on the day before “Liberation Day’s” tariffs took effect. The index has come down from its recent highs, but as of Tuesday sat nearly 10 points—or about 50%—above where it was when Trump took office.
Stocks, which have been on a six-day winning spree, have almost recovered all of their losses from “Liberation Day”. Wall Street remains uncertain despite the fact the tariffs on China remain 145% higher than they were when the year began and that no major trade deals have been announced since the tariffs paused.
Bonds and the Dollar Haven't Fared Much Better
Trump’s trade wars have also shaken the bond and currency market. Treasury yields dropped throughout the first six months of Trump’s second term, as investors became familiar with the president’s unpredictable and constantly shifting trade policy. Economists warned of tariffs causing a blow to the economy and raising prices. Uncertainty about tariffs, their impact and their fallout caused a sharp drop in business and consumer confidence.
Around the time of “Liberation Day”, the 10-year Treasury yield fell to a 6-month-low as investors fled the stock market chaos for the relative safety of bonds. Then, something unexpected happened. Yields spiked as bonds were sold off despite the fact that tariffs and economic outlooks had not changed.
The U.S. dollar also fell, as one would expect it to do with Treasury yields. The simultaneous sell-off of Treasury debt and U.S. dollars—two long-time safe havens for global investors—prompted some experts to wonder whether the world was responding to Trump’s tariffs by shunning U.S.-based assets, a phenomenon analysts dubbed the “Sell America” trade.
Investors search for safety in gold… and Bitcoin?
In the midst of all the economic uncertainty in the last few months, gold and bitcoin have stood out.
Gold prices have reached record highs in this year due to a flight towards safe havens that are currency and country neutral. Gold prices on Tuesday were around $3,325 for an ounce. This is up by more than 21% since Trump was inaugurated.
Bitcoin has had an uneasy year, compared with gold. On Tuesday, the cryptocurrency was down by more than 10%. But bitcoin faithful have been encouraged by what they’re seeing below the surface—namely, that the correlation between bitcoin and stocks has weakened.
Crypto advocates have called bitcoin “digital gold” for many years, citing its limited availability and potential as a hedge against inflation. Bitcoin has largely moved in tandem with the tech stocks over its recent history. It has fallen when growth fears are high and soared when risk appetite is at its highest. In the recent turmoil however, bitcoin has sometimes moved in the opposite directions from stocks, which some investors believe is evidence that the cryptocurrency finally shows its value as a safe-haven.
