It turns out that the new Trump Trade is to simply abandon the US altogether.
Treasury bonds, the US dollar, and gold all have reputations as safe-haven assets, which is why investors flock to them when all hell breaks loose in the equity market.
But this week, despite the fact that stocks saw truly historic levels of volatility amid tariff-mania, investors did something very odd: They bailed on bonds and bucks like never before.
Rising yields + falling dollar = au revoir USA
The dollar has long been the king of currencies due to US preeminence on the global stage. Rapid technological advances in Silicon Valley, cheap oil, and a strong economy all make US assets appealing to investors around the world, and have helped make the US dollar the global reserve currency of choice.
But all that changed in just a few short days. The greenback has fallen more than 3% when compared to global currencies, putting it on track for its worst week since 2022. Meanwhile, the euro had its best week in three years, while another favorite reserve currency, the Swiss franc, hit a 10-year high.
Even though President Trump walked back (to some extent) Liberation Day tariffs, it’s clear that traders are still spooked by the realignment in global trade relations, and are looking to invest in global assets instead.
“Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting,” Minneapolis Federal Reserve President Neel Kashkari told CNBC’s Squawk Box today.
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It wasn’t just the dollar that was acting weird. Bond yields, too, have risen over the past week as investors flee fixed income (remember, yields go up when bond prices go down). The 10-year Treasury yield ended the week at 4.49%, while the 30-year wrapped at 4.87%, capping off the 10-year’s largest one-week increase in decades.
While the unwinding of the so-called basis trade, which involves high-level trading strategies from hedge funds, could be contributing to the bond selloff, there’s an even more obvious reason staring us all in the face.
With economic upheaval an almost-daily occurrence and no clear tariff plan in sight, investors don’t want to own US Treasuries and they don’t want exposure to the US dollar—in fact, they don’t want to own US assets at all.
Gold continues historic rally
One corner of safety that’s still living up to its reputation? Gold.
While the metal cratered at the beginning of this week as investors panicked, it’s back and better than ever. Gold hit another record high yesterday, and analysts see the metal running even higher.
“Overall, the most likely scenario is continued volatility, with a positive bias towards gold as a safe haven, especially in the face of risks in equity markets, bonds, and potential trade disruptions,” explained senior market strategist at the World Gold Council Joseph Cavatoni.
After all, gold glitters wherever you are.—LB