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Wall Street stocks sank and gold hit a record high on Thursday as US President Donald Trump’s tariffs and investor doubts about a potential ceasefire between Russia and Ukraine weighed on risky assets.
The blue-chip S&P 500 closed 1.4 per cent lower, leaving the index in correction territory, having slumped more than 10 per cent — erasing about $5tn from its market value — since hitting a record high on February 19. The tech-heavy Nasdaq Composite slipped 2 per cent.
Investors piled into gold at the same time, pushing prices of the haven metal to a fresh high of $2,985 per troy ounce.
The moves come as investors grow increasingly concerned that Trump’s aggressive trade agenda will hit US economic growth, with the president on Thursday threatening to impose a 200 per cent retaliatory tariff on alcohol imports from the EU.
Investor sentiment was further hit after Russian President Vladimir Putin expressed concerns about how a potential ceasefire with Ukraine would be implemented and monitored.
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“Investors are repricing risk all over the world,” said Manish Kabra, head of US equity strategy at Société Générale. “But it’s happening most aggressively in the US, where there’s a major risk-off mood setting in.”
US equities had surged in the weeks after Trump’s landslide election win as investors bet that corporate tax cuts would lead to an economic boom. But those hopes have been hit by Washington’s flurry of tariff announcements, which have begun to weigh on business and consumer sentiment and dented animal spirits.
Goldman Sachs earlier this week slashed its year-end S&P 500 target from 6500 to 6200 while downgrading its US GDP forecast to 1.7 per cent from 2.4 per cent — its first below-consensus projection in two and a half years.
US growth concerns have spurred a rotation out of highly valued tech groups including the so-called Magnificent Seven into defensive pockets of the market, according to analysts.
Gold has climbed 14 per cent this year as investors turn to bullion as a hedge against inflation. Several banks have upgraded their gold price forecasts in recent weeks, including Macquarie, which said on Thursday morning that it expected gold to touch $3,500 per troy ounce this year.
“President Trump’s rapid move to announce, if not always to enact, import tariffs has contributed to geopolitical uncertainty and boosted inflation expectations, helping push down front-end real rates and supporting gold,” wrote Macquarie analysts in a note.
Fears of potential Trump tariffs have brought physical gold surging into New York — bullion inventories on Comex are at an all-time high of more than 40mn troy ounces — although that influx has started to slow.
