Summary
- US stocks are set to bounce back from Monday’s losses as investors weigh progress on trade talks with India and Tesla’s upcoming earnings.
- The dollar and Treasuries steadied, while the yen strengthened beyond 140 per dollar for the first time since September, amid concerns over the White House’s potential effort to replace Federal Reserve Chair Jerome Powell.
- Gold topped $3,500 for the first time, with bullion gaining as much as 2.2% on Tuesday, as trade tensions and eroded trust in dollar assets boosted traditional havens.
By John Viljoen
US stocks are set to bounce back from Monday’s losses as investors nervously weigh progress on trade talks with India and Tesla Inc.’s upcoming earnings. Gold topped $3,500 for the first time.
While S&P 500 contracts added 0.9%, the conversation on Wall Street was still focused on the implications of any White House effort to replace Federal Reserve Chair Jerome Powell. The dollar and Treasuries steadied. The yen strengthened beyond 140 per dollar for the first time since September.
In Europe, the Stoxx 600 index edged lower as traders returned from the Easter break. Novo Nordisk A/S slumped almost 10% on concern it faces tougher competition from Eli Lilly & Co.’s experimental weight loss pill.
Concerns that Donald Trump may be preparing to fire Powell have added to unease for traders already grappling with the turmoil unleashed by the president’s tariff onslaught. Trump’s policies and his broadsides against the Fed have forced a reappraisal of the dollar and Treasuries as havens in times of stress.
“With increasing rhetoric from the administration admonishing the Fed to cut rates and the markets entertaining intensifying discussions about the possibility of replacing the Fed chair, we don’t expect a rush back into the market from abroad,” John Velis, a strategist at Bank of New York Mellon, said of US bonds. “The haven status of such assets is increasingly in question.”
Attention later Tuesday will shift to Tesla, which reports first-quarter earnings after market close. The stock has dropped about 44% this year as controversy over Chief Executive Officer Elon Musk’s role in the federal government has contributed to a global sales slump.
In currencies, the yen outperformed, with the Bank of Japan said to be on course to keep raising rates.
“Market volatility, though, is driving some haven flow into the yen,” said Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo. “Reports that the BOJ sees little need to change their stance on rate hikes are also aiding sentiment in the currency, while denting the dollar.”
Meanwhile, the US said it’s made “significant progress” toward a bilateral trade deal following talks between Vice President JD Vance and Indian Prime Minister Narendra Modi on Monday. Barring a trade deal, India faces tariffs of up to 26% on its exports to the US under Trump’s April 2 levies, currently on a 90-day pause. Trump has repeatedly criticized India for its high tariffs. Bullion gained as much as 2.2% on Tuesday to briefly touch $3,500, before easing as traders took profits. Gold has surged by a third in 2025 as trade tensions roiled markets and eroded trust in dollar assets, boosting some traditional havens. Flows into bullion-backed exchange-traded funds and central-bank buying have supported the upswing.
Markets Are Discovering the Real Trump Trade Is ‘Sell America’
Summary
- The US’s financial dominance is being challenged, with the dollar and Treasury bonds losing appeal, and the country’s role as a consumer of last resort and military linchpin being questioned.
- Trump’s tariff war and threats to fire the Federal Reserve Chair are causing investor confidence to plummet, and the US’s reputation as a stable economy is being damaged.
- The shift away from US assets could have significant consequences, including a decline in the value of the dollar and a rise in interest rates, which could have a major impact on the global economy.
Two months into Donald Trump’s second term, the pillars of American financial hegemony — erected over the best part of a century — have rarely looked shakier.
Trump’s renewed tirades against the Federal Reserve, including the most explicit threats yet to fire Chair Jerome Powell, only amplified the shockwaves from his declaration of trade war on pretty much everyone. It’s forcing a reappraisal of the assets fundamental to US economic dominance. The dollar and Treasury bonds, traditional havens at times of stress, suddenly look much less appealing. It’s not long since investors were anticipating a so-called Trump trade, essentially turbocharging US exceptionalism, but now it looks more like a sell-America trade.
And that’s just part of an even broader and likely painful shift. The role of US households as goods-buyers of last resort for the global economy, and the American military as linchpin of security and political alliances, is being called into question too.
Governments everywhere are in the same boat as money managers: struggling to reorient themselves. It’s a turbulent backdrop for the International Monetary Fund’s spring meetings, which this week brings global economy chiefs to Washington — for decades the pole of world order, and now the epicenter of disturbance.
The geopolitical power structure is being reorganized under our eyes,” Jens Weidmann, the chairman of Commerzbank AG and previously the head of Germany’s central bank, told a London audience last week. The “exorbitant privilege of the US,” he said — using a phrase coined in Europe more than half a century ago to describe the dominance of the dollar — “may not be carved in stone.”
How is Trump’s tariff war threatening American exceptionalism and the global economic order? Bloomberg journalists answer questions in a Live Q&A on Thursday, April 24 at 11 a.m. EDT
Compounding the concerns, Trump is now escalating his war of words against the Fed, demanding immediate interest-rate cuts. Lawyers doubt he’s authorized to fire Powell. But the damage to investor confidence in the central bank’s independence — part of the bedrock appeal of US markets, along with a wider faith in the rule of law — may already be done.
“While we still treat a removal of the Fed’s chair as a low-likelihood event, the live prospect of reduced Fed independence unlocks dollar risks too large to ignore,” Barclays strategists wrote in a Monday note downgrading their dollar forecast.
Of course, the US is likely too big to topple too fast, but this month’s upheaval can’t be written off as an unintended side-effect. It’s true that Trump dialed back some tariffs in response to market squalls. But his administration explicitly wants radical change on all fronts — arguing that other countries have been freeloading off America’s currency, consumers, and military.
The US long relied on the lure of its consumer-led economy and the greenback as the underpinnings of global finance and trade, and enjoyed what were widely seen as benefits. Trump and his team are focused on the perceived costs, including the loss of jobs and the manufacturing industry, and large debts racked up to the rest of the world.
The US relies on capital inflows to finance its fiscal and trade deficits. Instead of money pouring into the country, it seemed to fly out immediately after April 2, when the president entered the White House’s Rose Garden brandishing a chart that showed the tariff hikes he planned to impose on almost every country, from friendly neighbors to chief superpower rival China.
Foreigners own $19 trillion of US equities, $7 trillion of Treasuries, and $5 trillion of US corporate bonds, accounting for about 20% to 30% of the total market, according to Torsten Slok of Apollo Management. The unwinding of those holdings could cause substantial pain.
Source: Bloomberg
