The market is in a panic! Trump ignites risk aversion sentiment, U.S. stocks plummet, while U.S. Treasuries and gold rise together

According to Zhitong Finance APP, on Thursday, as concerns about U.S. economic growth weighed on the stock market, investors flocked to buy U.S. Treasury bonds. U.S. inflation data slowed, trade frictions under the Trump administration escalated again, and safe-haven demand drove U.S. bond yields down, while gold surpassed $3,000 to reach a new high.

Tariff Policy Hits Market Sentiment, U.S. Stocks Plunge

On Thursday, concerns over tariffs once again disrupted Wall Street, pushing the S&P 500 index into a correction, falling to its lowest point in six months. The S&P 500 index dropped 1.4%, marking a decline of over 10% for three consecutive weeks, reaching a technical threshold for a pullback. It has fallen more than 6% this year. The tech-heavy Nasdaq 100 index also adjusted, falling 1.9%. The Dow Jones Industrial Average dropped 1.3%, down 9.3% from the historical record set last December.

Data shows that the S&P 500 index has fallen for 16 trading days from its peak on February 19, marking the seventh-fastest correction on record since 1929. Three of the seven fastest sell-offs of this magnitude occurred during President Trump's tenure, specifically in 2018, 2020, and now.

Due to concerns that the president's trade policies would hinder economic growth, the S&P 500 index has evaporated about $5 trillion in market value since peaking in February. As investors question the high valuations of large tech stocks, the Nasdaq 100 index has fallen over 10% from last month's high.

On Thursday, Trump threatened to impose a 200% tariff on wine, champagne, and other alcoholic beverages from France and other EU countries, marking the latest escalation in the brewing trade war, further dampening market sentiment. Steve Sosnick, chief strategist at Interactive Brokers, wrote in a report: "Another day of tariff uncertainty is putting pressure on the market again."

John Kolovos, chief technical strategist at Macro Risk Advisors, stated: "Most corrections take about two months to end." He noted that while the stock market seems oversold, "in terms of time, we are not there yet, as it took us about two weeks to reach these levels."

Despite recent data showing that the U.S. economy remains resilient, investor sentiment is deteriorating. This pessimism indicates the extent to which Trump's policies, particularly trade policies, have disrupted Wall Street's mood. Meanwhile, layoffs and eviction threats from federal agencies have weakened confidence in the strength of the labor market.

![bc2e385acdbf44f6a61b4e711c7f899.png](https://img.zhitongcaijing.com/image/20250314/1741909677546455.png? Wall Street strategists, including HSBC, Goldman Sachs, and Citigroup, have become more cautious about the U.S. stock market this week. However, JP Morgan strategists say that the recession risks reflected in the stock market are much greater than those reflected in the credit market, so surprises may occur.

After ending a two-year upward trend earlier this week, the U.S. stock market has been struggling to regain its footing. Technical analysts indicate that the S&P 500 index needs to reclaim the 200-day moving average pivot, which is currently close to 5738 points. Some technical charts also show that the S&P 500 index is in oversold territory. The 14-day relative strength index of the index hovers around 30, a level typically considered a technical signal of excessive selling.

Safe-haven demand boosts U.S. Treasury bonds

In this context, the decline in U.S. stocks has stimulated safe-haven demand, leading to a rise in U.S. Treasury bonds. With the yields on 10-year and 30-year U.S. Treasury bonds reaching their highest levels so far this month, this round of increases has avoided a potential third consecutive day of declines. The yield on the benchmark 10-year U.S. Treasury bond fell by 4.04 basis points to 4.2720%.

Ed Al-Hussainy, global interest rate strategist at Columbia Threadneedle Investments, stated: “Government bonds have done a good job buffering the decline in the stock market. This is a very good sign for investors. It indicates that the diversification from stocks to government bonds is still working. This is a big deal.”

As the major U.S. stock indices plummeted, U.S. Treasury yields began to decline earlier in the New York afternoon session. The yield on the 10-year U.S. Treasury bond fell by about 5 basis points to 4.26%, having previously risen to a high of 4.35% in the morning session.

Data released on Thursday showed that the U.S. February PPI was flat at 0%, the smallest increase since July last year; the expected value was 0.3%, and the previous value was 0.6%. However, despite the overall PPI being flat and the core PPI showing a month-on-month decline. In terms of core PPI data, the U.S. February core PPI increased by 3.4% year-on-year, below the widely expected 3.5% by economists, and significantly cooling compared to the previous value of 3.6%; the February core PPI fell by 0.1% month-on-month, far below the widely expected month-on-month increase of 0.3%, and a significant cooling compared to the previous month-on-month increase of 0.5%.

Meanwhile, data released on Wednesday showed that the U.S. consumer price increase in February was the slowest in four months, providing some relief to consumer pressure before the implementation of tariff measures (which are expected to raise costs). The data showed that after a significant increase of 0.5% in January, the CPI rose by 0.2% month-on-month in February. Excluding the often volatile food and energy categories, the core CPI also rose by 0.2% CreditSights' investment-grade and macroeconomic strategy director Zachary Griffiths stated that the ongoing tariff threats "have raised concerns about future inflation and rekindled the possibility of raising policy interest rates for a longer period." Griffiths noted, "Everything will depend on the confirmation or contrary data regarding the economic slowdown to determine whether the 10-year U.S. Treasury yield will sustainably fall below 4.25%, or if the current new range is between 4.25% and 4.75%."

Swap traders expect the Federal Reserve to cut interest rates by about 66 basis points this year. This implies at least two rate cuts of 25 basis points, with the market fully pricing in the first cut before July. The market's recovery has depressed expectations for the yield on Thursday's 30-year U.S. Treasury auction. Despite lukewarm auction demand indicators, yields subsequently fell further as the stock market benchmark declined.

Mizuho Securities' macro strategy director Dominic Konstam expressed growing concerns that a U.S. economic recession is imminent, which would force the Federal Reserve to make significant rate cuts later this year, thereby lowering yields. Konstam stated, "In terms of employment and GDP, this could be an unpleasant recession. This means the Federal Reserve will have to cut rates significantly."

Gold Futures Hit New Highs, Surpassing $3,000

On Thursday, New York gold futures surpassed the $3,000 mark, setting a new historical high with an intraday surge of over $50. The escalation of the trade war and mild inflation data have fueled further speculation in the market regarding potential rate cuts by the Federal Reserve this year, collectively driving up gold prices.

Against this backdrop, Wall Street analysts are raising their forecasts. The latest forecast comes from Macquarie Group, which expects gold to reach $3,500 per ounce by the third quarter of 2025. Macquarie Group's commodity strategy director Marcus Garvey stated in a report on Thursday, "Gold has significantly outperformed our expectations this year." He further noted, the firm has raised its average gold price forecast for the third quarter of 2025 to $3,150 per ounce, with a projected peak price reaching $3,500.

Macquarie's latest forecast follows that of BNP Paribas, whose analysts recently predicted that gold prices will surpass $3,100 per ounce in the second quarter of 2025. BNP Paribas commodity analyst David Wilson noted in a report on Wednesday, "The frequent tariff threats from the Trump administration and the reshaping of international relations have significantly heightened global macroeconomic and geopolitical uncertainty, greatly boosting the gold market."

Since the beginning of the year, gold futures prices have risen by more than 11% and have repeatedly set historical records. Wall Street generally believes that the central bank's continued purchases and the uncertainty of tariff policies are the main factors driving up gold prices. Some analysts even suggest that the U.S. may impose tariffs on gold imports, further exacerbating market anxiety.

In the face of this uncertainty, institutional investors have transported large amounts of physical gold bars to New York vaults to avoid potential tariff impacts and to take advantage of price differences between the London and New York markets for arbitrage.

Robert Yawger, head of the U.S. energy futures department at Mizuho Securities, stated in a report that the uncertainty related to tariffs is driving investors to flee to safe assets, pushing gold prices higher. He said, "Aside from storing cash in gold, which is at an all-time high, we have nowhere to hide."

In addition, last month Goldman Sachs also raised its year-end target price for gold, expecting gold prices to reach $3,100 per ounce by the end of 2025, up from the previous target price of $2,890.