It was a chaotic week for markets as Trump’s tariff whipsaw sent US equities on a volatile ride and investors fled traditional safe-haven assets, escalating concerns over the stability of the US economy.
Risk-off investments aggressively sold off, with long-term Treasurys logging their biggest upside swing since 1982 while the US dollar sharply weakened against foreign currencies.
It’s an unusual development as concerns over stagflation, where growth stalls, inflation persists, and unemployment rises, have kept Wall Street on edge that shifting trade dynamics could induce a self-inflicted recession. In that scenario, investors would typically flock to safe havens like bonds or US currencies in order to hedge themselves against volatility.
Quite dramatically, that hasn’t been the case — and it could signal an unsettling fundamental shift across global financial markets.
“I do think it’s severe,” Marc Chandler, global foreign exchange chief market strategist at Bannockburn, told Yahoo Finance when asked about the sell-off in the US dollar and bond market. “People are concerned that maybe we’re seeing a capital strike against the US, where large pools of capital are selling US assets and taking their money home.”
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Evercore ISI’s Krishna Guha described recent trading action as a “rare, ugly, and worrying combination of market moves” that reflects “evaporating US growth exceptionalism.”
Kathy Jones, chief rates strategist at Charles Schwab, added in a post on X that the double drop in Treasurys and the dollar “suggests foreign and domestic investors are concerned about US economic outlook.”
In other words, a possible “sell America” trade could be brewing.
“All of these [moves] really point to a coordinated move away from US assets,” Mike Dickson, head of research and quantitative strategies at Horizon Investments, told Yahoo Finance on Friday. “That is a trend that is likely to persist here in the short to medium term.”
Trump’s trade war has largely been blamed for the chaos.
“Whipsaw is definitely the right word for this,” Michael Darda, chief economist and macro strategist at Roth Capital Partners, told Yahoo Finance’s Market Domination in an interview on Thursday. “Financial markets are being whipsawed, and that’s due to public policy being chaotic.”
To recap: Trump pivoted Wednesday on enacting reciprocal tariffs on non-retaliatory countries. Markets initially praised the development before sharply reversing course as Trump doubled down on his trade war with China.
