Wall Street ends lower on tariff worry as Fed decision eyed

NEW YORK – US stocks fell on Tuesday to snap a two-session streak of gains, as investors exercised caution ahead of a monetary policy decision from the Federal Reserve, while gauging the potential impact of President Donald Trump’s tariff policies.

The Fed will release its latest policy statement on Wednesday, where the central bank is widely expected to keep interest rates unchanged, along with its updated summary of economic projections (SEP).

Markets are currently pricing in about 60 basis points (bps) of cuts from the Fed this year, although several US central bank officials have cautioned against the Fed moving too quickly on rates and said they would wait to see the impact of tariffs in economic data before making any policy shifts.

“There’s just great uncertainty here about the tariffs, how extensive they are going to be, how that’s going to economically impact us, how much the Fed might ease eventually and the economy in general,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“There is a lot of confusion out there, and when there’s confusion, when there isn’t a real opportunity for stocks to go up and for companies to expand and make more money, there’s fear.”

The Dow Jones Industrial Average fell 260.32 points, or 0.62%, to 41,581.31, the S&P 500 lost 60.46 points, or 1.07%, to 5,614.66 and the Nasdaq Composite lost 304.55 points, or 1.71%, to 17,504.12.

Adding to inflation concerns, US import prices unexpectedly rose in February amid higher costs for consumer goods.

Stocks had recently shown some signs of stabilizing after several weeks of declines that sent the S&P 500 and Nasdaq down more than 10% from their recent highs, also known as correction territory.

The blue-chip Dow is slightly more than 2% away from reaching correction levels.

Growth stocks were among the hardest hit, with the S&P 500 growth index as much as 2.2% during the session. Communication services, down 2.14% was the worst performing of the 11 major S&P sectors.

Russian President Vladimir Putin and US President Donald Trump agreed to seek a limited 30-day ceasefire against energy and infrastructure targets in Ukraine, while talks aimed at advancing toward a broader peace plan will begin “immediately,” the White House said.

Alphabet fell 2.2% after the company said it would buy Wiz for about USD 32 billion in its biggest deal as the Google parent doubles down on cybersecurity.

Nvidia shares declined 3.35%. CEO Jensen Huang said the chipmaker was well placed to navigate a shift in the artificial intelligence industry, in which businesses are moving from training AI models to getting detailed answers from them.

Tesla stumbled 5.34% after brokerage RBC slashed its price target on the EV maker’s stock to USD 120 from USD 320, citing reduced expectations for its full self-driving pricing and robotaxi market share. Its shares are now down nearly 45% on the year.

Reflecting the defensive tone, investors moved to safe-haven assets, with gold trading at a record high, after crossing USD 3,000 per ounce for the first time last week.

Declining issues outnumbered advancers for a 1.69-to-1 ratio on the NYSE and a 1.93-to-1 ratio on the Nasdaq.

The S&P 500 posted four new 52-week highs and four new lows, while the Nasdaq Composite recorded 32 new highs and 142 new lows.

Volume on US exchanges was 13.40 billion shares, compared with the 16.41 billion average for the full session over the last 20 trading days.

(Reporting by Chuck Mikolajczak; Editing by Aurora Ellis)

Yields fall ahead of Fed decision, after strong 20-year auction

NEW YORK – US Treasury yields fell on Tuesday as traders bet that Federal Reserve Chair Jerome Powell will adopt a relatively dovish tone when he speaks at the conclusion of the US central bank’s two-day policy meeting on Wednesday.

Strong demand for an auction of 20-year bonds helped send yields to session lows while falling stocks also reignited safe-haven demand for US government debt.

The Fed is widely expected to leave interest rates unchanged on Wednesday and investors will focus on updated economic and interest rate projections by Fed policymakers.

Powell’s comments will be watched for any further clues that the central bank is becoming more concerned about the economic outlook.

“The market had gotten a little too concerned that perhaps the Fed would continue to make inflation the central focus,” said Kim Rupert, managing director at Action Economics, but “we’re coming down on the side of not so hawkish as might have been the case.”

Powell said earlier this month that the Fed was in no rush to resume rate cuts as inflation remains above the central bank’s 2% annual target.

Investors are increasingly nervous that tariffs will slow the US economy and potentially increase price pressures, while large layoffs by the federal government are expected to lead to higher unemployment.

Interest rate futures traders see the Fed as most likely to resume interest rate cuts in June.

The yield on benchmark US 10-year notes was last down 3.3 basis points on the day at 4.274%.

The two-year note yield, which typically moves in step with interest-rate expectations for the Federal Reserve, fell 1.9 basis points to 4.034%.

The yield curve between two-year and 10-year notes flattened by around two basis points to 24 basis points.

Yields rose earlier on Tuesday after data showed that US single-family homebuilding rebounded sharply and US manufacturing production increased more than expected in February.

Thomas Simons, chief US economist at Jefferies, noted that sentiment on the economy has improved, albeit from deeply pessimistic levels.

“The data so far suggests that most of the weakness that we saw in January was a combination of bad weather and kind of a reflexive pause after a strong Q4 for a lot of things. … Incrementally it’s been not as bad as it was over the last two weeks or so,” he said.

Yields hit session lows after the Treasury saw strong demand for a USD 13 billion sale of 20-year bonds.

The debt sold at a high yield of 4.632%, more than a basis point below where it traded before the auction. Demand was 2.78 times the amount of debt on offer, the highest ratio since April.

The Treasury will sell USD 18 billion in 10-year Treasury inflation-protected securities on Thursday.

Traders are also focused on peace talks to end the Russia-Ukraine war.

Russian President Vladimir Putin agreed on Tuesday to a proposal by US President Donald Trump that Russia and Ukraine cease attacking each other’s energy infrastructure for 30 days, the Kremlin said following a lengthy phone discussion between the leaders.

Also on Tuesday, Germany’s outgoing parliament passed a massive increase in government borrowing, including a sweeping change to the country’s debt rules, as had been expected.

(Reporting By Karen Brettell; Editing by Hugh Lawson and Leslie Adler)

Investors RoW back on Wall Street exceptionalism: McGeever

ORLANDO, Florida – As the end of the first quarter approaches, world stock markets are in a curious position. They are benefiting from capital flowing out of Wall Street, but they also face major risks if the US selloff turns into a rout.

As President Donald Trump’s trade war has snuffed out the “US exceptionalism” narrative, a yawning gap has opened between US equities and those in the ‘Rest of the World’.

The selloff abated briefly and the S&P 500 notched its first consecutive daily rises in a month. But Wall Street was back in the red on Tuesday, and US underperformance – the widest in more than 20 years, by some measures – shows little sign of reversing course.

Indeed, history suggests this gap could widen further, although only if the US economy avoids tipping into a serious recession.

CORRECTION THRESHOLD

As the S&P 500 flirted with 10% correction territory last week, ‘RoW’ markets were outperforming by as much as 9 percentage points, the biggest such gap since 2002, according to strategists at Citi.

Historically, when US corrections eclipse the 10% mark but don’t breach the 20% ‘bear market’ threshold, Wall Street underperforms over the entire downturn, Citi noted. In US bear markets and recessions, however, no country or market is immune – growth and asset prices everywhere suffer.

This scenario appears to be unfolding. Most economists agree that US growth will slow this year, but few think it will fall off a cliff. While the Atlanta Fed’s GDPNow model is signaling a 2.1% contraction in Q1, that remains an outlier.

Contrast that with the sudden improvement in Germany’s growth outlook thanks to Berlin’s proposed fiscal bazooka. Beijing also appears ready to do whatever it takes to support China’s economy and markets – call it the ‘Xi put’.

Indeed, the tailwinds for RoW outperformance seem to be building.

CROWDED OUT

The rotation out of Wall Street to the rest of the world has been underway all year. Bank of America’s March fund manager survey shows that allocations to eurozone markets are the highest since 2021, while US allocations plunged at the fastest rate on record.

This might suggest the switch has run its course. But the same survey also showed that the most crowded trade is still ‘long’ the Magnificent Seven shares of America’s biggest tech firms.

And even though US earnings multiples have fallen to the lowest point since September, they remain lofty by historical standards due to Big Tech’s still-rich valuations. Indeed, US stock valuations remain well above those in other developed markets, so this rotation may be far from over.

FINE LINE

“Corrections are healthy, they’re normal,” Treasury Secretary Scott Bessent told ‘Meet The Press’ on Sunday, adding: “I’m not worried about the markets.

Corrections are indeed normal and healthy, occurring roughly once every couple of years with an average decline of 14%. As Mark Riepe at Charles Schwab points out, of the 27 corrections since 1974 including the current one, only six have gone on to become bear markets.

But Bessent’s remarks could also be interpreted as a sign of how relaxed the Trump administration is about the current decline, suggesting they won’t act to prevent a further slide. It’s a risky stance to take at such a delicate juncture for the economy.

And the RoW needs to watch out, because its outperformance will likely only continue if the US doesn’t implode. As Dario Perkins at TS Lombard notes, “Make no mistake – a US recession would bring down the entire world.”

That would quickly wipe out Wall Street’s underperformance, but unfortunately, also a whole lot more.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; editing by Deepa Babington)

Gold holds below USD 3,000 ahead of Fed rate decision

Gold prices firmed on Monday, sitting just below the USD 3,000-mark that was broken last week, with the focus on trade tariffs and the US Federal Reserve’s policy meeting.

Spot gold was up 0.5% at USD 2,998.14 an ounce by 01:30 p.m. ET (1730 GMT), having hit a record high of USD 3,004.86 on Friday.

US gold futures settled 0.2% higher at USD 3,006.10.

The Federal Reserve will give its new economic projections this week, which will provide the most tangible evidence yet of how US central bankers view the likely impact of President Donald Trump’s policies that have clouded a previously solid economic outlook.

There are “no guarantees” there will not be a recession in the United States, although there could be an adjustment, Treasury Secretary Scott Bessent said on Sunday.

“I expect some consolidation in gold prices…Right now, the market is in a ‘wait-and-see’ mode ahead of the Fed’s decision,” said David Meger, director of metals trading at High Ridge Futures.

Markets expect the US central bank to hold interest rates on Wednesday, with the next cut in June.

Zero-yield bullion is considered a hedge against uncertainty and tends to thrive in a low-interest environment.

Data showed US retail sales rebounded by less than expected in February, signaling moderate economic growth despite import tariffs and federal worker layoffs dampening sentiment.

“Should economic data continue to soften and the global tariff war escalate, gold will continue to benefit,” analysts at Heraeus Metals said in a note.

Trump, meanwhile, said he plans to speak to Russian President Vladimir Putin on Tuesday and discuss ending the war in Ukraine.

Spot silver was unchanged at USD 33.78 an ounce and palladium was up 0.2% at USD 967.01, while platinum added 0.9% to USD 1,002.

(Reporting by Daksh Grover in Bengaluru; Editing by Kirsten Donovan and Shreya Biswas)

Yields rise as retail sales improve, stocks rebound

Shorter-dated US Treasury yields rose on Monday as a closely watched segment of February’s retail sales report beat economists’ expectations, before the Federal Reserve this week is expected to keep interest rates on hold.

A stock market rally also reduced safe haven demand for US government debt.

Yields hit a session high after the Control Group in February’s retail sales data rose 1% during the month. Trading was choppy, however, as headline retail sales posted only a 0.2% gain, below economists’ estimates.

“You can make either positive or negative trends out of it. Much of the swings were in non-store retailers. They were unusually weak last month. They were unusually strong this month. It probably just evens out,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

Other data showed that factory activity in New York State plummeted this month by the most in nearly two years.

The yield on benchmark US 10-year notes was last up 0.2 basis points on the day at 4.31%.

The 2-year note yield, which is highly sensitive to interest rates, rose 4 basis points to 4.055% and reached 4.065%, the highest since February 28.

The yield curve between two-year and 10-year notes US2US10=TWEB flattened by around four basis points to 25 basis points. This flattening is reflecting some concerns that the Fed may be too slow to cut rates as the economy slows.

Investors remain nervous that new trade tariffs will dent the economy while also pushing up prices.

US President Donald Trump said he has no intention of creating exemptions on steel and aluminum tariffs and said reciprocal and sectoral tariffs will be imposed on April 2.

US Treasury Secretary Scott Bessent played down recent stock market weakness in an interview on Sunday, saying corrections were healthy and that markets “will do great” if the administration puts into place good tax policy, deregulation and energy security.

That dashed some hopes that the government would change policies as a result of market moves.

The Fed is expected to hold interest rates steady when it concludes its two-day meeting next Wednesday, and Chair Jerome Powell is likely to repeat recent comments that the US central bank is in no rush to resume rate cuts.

“Powell kind of sealed the deal with his Friday speech before the blackout period, and the message there was – hey, it’s too soon to really think about protecting the economy with rate cuts,” Le Bas said. “There’s no reason for that to shift in such a short period of time.”

Fed funds futures traders see the US central bank as most likely to resume rate cuts in June. Fed policymakers will update their interest rate and economic projections this week.

Traders are also watching discussions over a possible Russia-Ukraine peace deal.

Trump said he plans to speak to Russian President Vladimir Putin on Tuesday and discuss ending the war in Ukraine, after positive talks between US and Russian officials in Moscow.

The Treasury will sell USD 13 billion in 20-year bonds on Tuesday, and USD 18 billion 10-year Treasury Inflation-Protected Securities on Thursday.

(Reporting By Karen Brettell; Editing by Toby Chopra and Nick Zieminski)

Dollar dented by economic worries; euro remains in favor

NEW YORK – The dollar hovered near a five-month low against the euro on Monday as worries about the economic fallout from US President Donald Trump’s protectionist trade policies kept investors cautious on the dollar.

The euro, which has advanced in recent sessions, lifted by hopes of a German fiscal deal, was 0.4% higher at USD 1.092325. The common currency was just shy of USD 1.0947 it hit last week, its highest since October 11.

Currency markets have undergone a shift in recent months as traders re-evaluate their initial expectations that Trump’s economic policies would both support the dollar and cause other currencies to weaken. The reassessment has prompted the dollar to retreat 6% against the euro since mid-January.

“I think the market just called it wrong,” said Kyle Chapman, FX markets analyst at Ballinger Group, in London.

“They were leading on the tax cuts and deregulation to boost growth, while at the same time creating a sort of risk-averse mood,” he said.

“Actually the focus has been much more on the protectionism, sending people’s heads spinning,” Chapman said.

Since taking office in January, Trump’s declarations on imposing and then suspending tariffs against a wide range of trading partners have unnerved markets.

While ruling out the possibility of a financial crisis, Treasury Secretary Scott Bessent, in an interview aired on Sunday, said there were “no guarantees” there will not be a recession in the United States.

The dollar found little support from a Commerce Department report on Monday that showed retail sales rebounded moderately in February, after a revised 1.2% decline in January.

The week is packed with central bank meetings, including the Federal Reserve, the Bank of Japan and the Bank of England, all of which are widely expected to hold fire as policymakers try to see through the current economic uncertainty.

The euro has strengthened after German parties on Friday agreed on a fiscal deal that could boost defence spending and revive growth in Europe’s largest economy.

Analysts at Societe Generale said on Monday that they had changed their currency forecasts “to reflect Germany’s planned fiscal changes, the US economy’s self-inflicted (relative) fragility, and Japan’s escape from deflation.”

They see the euro at USD 1.13 by year-end, up nearly 4% from current levels, and the yen at 139 per dollar, up about 7%.

On Monday, the dollar was 0.4% higher against the yen at 149.160 yen, not far from the five-month low of 146.52 yen touched last week.

The Bank of Japan is tipped to keep interest rates steady when it meets on Wednesday, but the conditions for another rate hike have been falling into place, with big Japanese firms offering bumper pay hikes in wage talks with unions for a third-straight year.

Speaking in parliament last week, BOJ Governor Kazuo Ueda said he expects wage rises to spur a pick-up in consumption, although he was “very worried” about uncertainties surrounding overseas economic developments.

Meanwhile, the Chinese yuan edged back towards its strongest level in four months in offshore trading, changing hands at 7.2332 per dollar. Last Wednesday, it strengthened to 7.2158 per dollar for the first time since November 13.

On Sunday, China’s State Council announced a “special action plan” to boost domestic consumption featuring measures including increasing residents’ income and establishing a childcare subsidy scheme.

During the session, a string of China data showed the economy started the year on a firmer footing with retail sales picking up speed in the first two months.

In cryptocurrencies, bitcoin, the world’s largest cryptocurrency by market cap, was up 1.6% on the day at USD 84,552.

(Reporting by Saqib Iqbal Ahmed; Additional reporting by Kevin Buckland and Alun John, Editing by Angus MacSwan and Sandra Maler)

Houston, we may have an asset problem, not a debt problem: McGeever

ORLANDO, Florida – It’s widely believed that the biggest issue with US consumers’ balance sheets is indebtedness, but the Federal Reserve’s latest financial accounts – and the volatile stock market – suggest that larger risks may be on the other side of the ledger.

This seems counterintuitive. Household wealth has never been higher, rising some USD 163 billion in the fourth quarter of last year to a record net USD 169.4 trillion, as gains in stocks and ‘other’ assets more than offset declines in bonds and home prices, according to the Fed’s latest report.

And when looking at assets as a share of gross disposable income, considered a more accurate barometer of wealth, households have rarely ever been richer.

But cracks are starting to appear in the edifice.

Households directly or indirectly owned USD 56 trillion worth of stocks at the end of last year, a record amount. As a share of total gross wealth, equity exposure is at a historically high level, and vulnerable to a significant decline if markets slide.

The market is wobbling. With only two weeks left of the current quarter, the S&P 500 is heading for a fall of 4% and the Nasdaq is down 8%. Some USD 5 trillion has been wiped off the US stock market in the last month, the sharpest dose of wealth destruction since the bear market of 2022.

This has potentially profound implications for a consumption-based economy where the top income decile – the owners of nearly all of the country’s financial assets – is responsible for roughly half of the nation’s consumer spending.

So while it’s famously been said that “the stock market is not the economy,” that may not be strictly true.

Oxford Economics’ chief US economist Ryan Sweet – one of many who have recently cut their 2025 growth forecasts – has warned that household net wealth matters more for the consumer spending outlook than ever before.

“A stronger wealth effect has proven to be a tailwind for overall consumer spending, but it could just as easily turn into an outsize drag in the event of a bear market,” he wrote last week.

HIGH WATER MARK

He’s right. One of the most remarkable statistics in recent years is that the US economy has grown 50% in nominal terms since the post-pandemic low in 2020, less than five years ago.

Household wealth has played a key role in this via a virtuous cycle of strong consumer spending, high corporate profits, soaring stock markets and resilient economic activity.

But what if one part of that cycle – asset prices – has reached its high-water mark?

What was a virtuous cycle when asset prices were rising could quickly flip to a vicious cycle when they fall. We may already be seeing the beginnings of this. Consumer sentiment is now at a two-and-a-half-year low, University of Michigan surveys show, and tepid monthly retail sales reports are offering reasons to be concerned.

ON THE OTHER SIDE

Meanwhile, the other side of the household balance sheet is actually in relatively good shape.

Total nominal debt fell slightly in the fourth quarter to USD 20.79 trillion, the first decline in nearly five years. And if you exclude a few quarters in the pandemic distorted by government stimulus checks, debt as a share of gross disposable income is now the lowest since 1999. Applying the same criteria, mortgage debt – households’ biggest single debt burden – as a share of GDI is the lowest since 1998.

So overall, debt levels appear relatively low and stable, while asset values are high and primed for a fall.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever)

Event contracts: Trading’s next big thing or ‘backdoor to gambling’?

March 17 (Reuters) – Event contracts have exploded in popularity since the US presidential election, fueling a heated debate between traders who have embraced the nascent asset class and critics who liken it to gambling.

Several market players such as retail-favorite Robinhood HOOD.O and Interactive Brokers IBKR.O have rolled out event contracts in recent months, looking to cash in on the boom.

Robinhood on Monday also launched a standalone hub on its app to allow traders to wager on college basketball and US interest rates.

Here is how event contracts are shaping up as a new asset class:

WHAT ARE EVENT CONTRACTS?

Event contracts allow traders to bet on specific outcomes, offering opportunities to profit from predictions on everything from sports and entertainment to politics and the economy.

Users can speculate on whether a movie will surpass a certain Rotten Tomatoes score, or if the US will enter a recession this year, or if the price of bitcoin will breach a new milestone.

When event contracts became more popular ahead of the US presidential election, Elon Musk said on X that prediction markets were “more accurate than polls, as actual money is on the line”.

HOW DO THEY WORK?

Unlike gambling, where bets are placed against the house, event contracts function as a marketplace between traders.

Such contracts typically pay out USD 1 if the event occurs. Their prices fluctuate depending on the likelihood of the underlying outcome.

WHY ARE EVENT CONTRACTS MAKING HEADLINES?

While proponents of event contracts see them as a new avenue for traders, their road to legitimacy has been fraught with challenges.

In 2023, the US Commodity Futures Trading Commission rejected a proposal by prediction marketplace KalshiEX to permit trading of political event contracts tied to Congressional control, saying they involved unlawful gaming and were “contrary to the public interest”.

Kalshi sued, and was cleared to resume trading these contracts in October. The ruling also encouraged others waiting to dip their toes into the sector.

Still, concerns remained. In a January interview with the Financial Times, former CFTC Chair Rostin Behnam said he was concerned about the legality and social impact of bets on political and other events.

Robinhood was also forced to roll back its Super Bowl event contracts in February, just a day after the launch, following a request from the CFTC.

WHAT’S NEXT?

The rise of event contracts reflects the trend of “democratization” in financial markets as firms seek to attract retail investors. An anticipated wave of deregulation under President Donald Trump may help companies facilitating these trades.

CFTC Acting Chair Caroline Pham’s pledge to end “regulation by enforcement” could also foster a more collaborative environment.

Critics, however, still voice concerns.

“These contracts are a backdoor attempt to bring gambling into financial markets,” said Cantrell Dumas, director of derivatives policy at Better Markets, a group that advocates stricter oversight of the financial sector.

“Expanding the CFTC’s role into gambling would stretch its limited resources and divert it from its core mission of overseeing legitimate derivatives markets.”

(Reporting by Niket Nishant in Bengaluru; editing by Arpan Varghese and Devika Syamnath)

Hedge funds regain appetite for US stocks, feel full of Europe, Asia

Hedge funds added U.S. risk most days last week

European stocks were unwound at fastest pace in over five years

Some portfolio managers hunt for bargains

By Carolina Mandl

NEW YORK, March 17 (Reuters) – Global hedge funds started to add back U.S. equities to portfolios last week following a massive selloff in Wall Street’s major indexes, an early indication of optimism about the country.

Goldman Sachs said in a separate note that after unwinding positions in U.S. stocks on March 7 and 10, hedge funds started to add exposure to the world’s largest economy back for the rest of the week through Thursday.

The bank showed hedge funds added both long and short bets on U.S. stocks, adding hedge funds’ global portfolios became more bearish, as the proportion of bets stocks will fall grew relative to long positions last week. In a separate note, JPMorgan disclosed the same trend.

Elsewhere, portfolio managers continued to shed risk in both Europe and Asia, Goldman added. It said European stocks were net sold at the fastest pace in over five years, as well as emerging markets in Asia.

The unwinding seen on Friday and Monday represented the largest two-day deleveraging in four years, with some activity comparable to the early days of the COVID pandemic, Reuters reported earlier.

All major U.S. indexes posted losses last week as investors grew wary of the economic outlook amid uncertainties around President Donald Trump’s tariff policy.

Still, they had a comeback on Friday, with the S&P 500 .SPX up 2.18%, the Dow Jones Industrial Average .DJI up 1.74% and the Nasdaq .IXIC up 2.68%.

The hedge funds’ sudden comeback has different reasons, with some investors searching for bargains, while also adding bets that stocks will further decline.

Trend-following hedge funds, also known as CTAs (commodity trading advisers), are net short in U.S. equities, according to JPMorgan.

Still, Barclays said in a note on Friday that there are some signals of capitulation in the U.S. market, which could prompt some “buy the dip,” although uncertainties around the tariff policy could contain the trend.

Charles Lemonides, founder of long/short equities hedge fund ValueWorks, has added long U.S. positions to his portfolio amid the selloff as he believes a 10% correction for both the Nasdaq and the S&P posed some opportunities.

“The market has been going down and extrapolating that it will continue to go down. We obviously haven’t seen a recession or a real economic slowdown yet,” he said.

A 7.68% gain in the STOXX 600 .STOXX this year, while the S&P 500 is down 4%, has narrowed the valuation gap between the U.S. and Europe, making the “old continent” stocks not so attractive.

Anders Hall, chief investment officer at Vanderbilt University, said hedge funds were taking a more cautious approach as, while the uncertainties around the U.S. trade policies and a potential recession are likely to remain, Europe has its own economic and political challenges.

Europe is dealing with a rearmament plan driven by fears that it can no longer count on the U.S. protection as Russia’s war in Ukraine continues. Germany has announced a defense and infrastructure spending bonanza. The region also deals with tariff threats.

“The U.S. market, while not without risks, may be seen as a relatively safer bet by some,” he said, adding U.S. markets are more liquid than Europe’s, which can be an advantage if hedge funds have to adjust positions amid increased volatility.

(Reporting by Carolina Mandl in New York; Editing by David Gregorio)

((carolina.mandl@thomsonreuters.com; +1 (917) 891-4931;))

Trump-driven turbulence draws new investors into gold

LONDON – Investors seeking shelter from political and economic volatility triggered by the new US administration are increasingly moving into gold Exchange-Traded Funds, adding momentum to the market’s record rally.

Since US President Donald Trump took office in January, his radical policy shift, including trade tariffs, comments he aims to annex Greenland and his unconventional approach to diplomacy to try to end the war in Ukraine have driven gold prices to successive records.

Initially an influx into gold exchange-traded funds, or baskets of securities that trade like a stock, was dominated by European investors, but analysts say the policy upheaval has begun to tempt even US investors who historically have favoured equities.

On Friday, gold hit its latest record, at USD 3,004.86 an ounce, a gain of 14% since the start of 2025, following 27% growth in 2024.

Gold holdings in Europe-listed exchange-traded funds, meanwhile, have increased by 46.7 metric tons, a rise of 3.6%, to 1,334.3 tons since the start of 2025, a contrast to the 2021-2024 period that was marked by big outflows, according to the World Gold Council (WGC).

Further inflows could provide support as the market moves further into overbought territory.

“Investors, such as real money managers, especially those located in the West needed a growth and stock market scare big enough to persuade them back into gold. That is what we are seeing,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“Since 2022 when the Federal Reserve began its rate-hiking cycle, these investors left gold… but with the other markets now showing signs of suffering and the potential for even lower funding rates in the future, they have returned.”

US retail investors have become wary of stock markets after Monday’s sell-off when the benchmark S&P 500 index registered its biggest drop this year. Analysts say that adds to demand for gold as a refuge from turbulence.

“In the US, some investors may be less concerned despite similar global risks, possibly due to stronger confidence in the domestic economy,” Alexander Zumpfe, a precious metals trader at Heraeus Metals.

“However, recent inflows into North American gold ETFs indicate that interest in gold as a hedge is also growing in the US.”

In the United States, gold holdings in ETFs have climbed 68.1 tons, a gain of 4.3%, to 1,649.8 tons so far this year.

Equities loss could be gold’s gain

Saxo’s Hansen said Trump’s policies have triggered a retreat from US stocks, which for years attracted large amounts of investor cash, and that gold could be a beneficiary, at least in the short term.

Apart from the investor-led flow into exchange-traded funds, retail investors the world over are hungry for exposure to gold.

The number of people buying gold for the first time on BullionVault’s online market jumped in February to the highest since May 2021, said Adrian Ash, head of research at London-based BullionVault.

Gold investor demand at BullionVault exceeded customer profit-taking by 0.2 tonnes, the highest since June 2023, Ash said.

While supportive of the market, however, even all this may not drive the gold price higher, analysts say, given the signs the market is overbought.

To stay above the USD 3,000 per ounce mark, gold would need to see retail bar and coin demand in Europe and North America to step up further and/or central bank buying intensify, said John Reade, senior market strategist at WGC.

So far, only demand for physical gold bars and coins is rising in Germany this year after a slump of recent years.

(Reporting by Polina Devitt;
Editing by Pratima Desai, Veronica Brown and Barbara Lewis)

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