Volatility Lashes US Assets in Wall Street Unrest

Cam Dawson, CIO at NewEdge Wealth, joins for a discussion on the equity dive this week, yesterday's pullback, and whether the choppiness is set to continue. She speaks with Bloomberg's Tom Keene and Damian Sassower.

Bonds sank alongside the dollar at the end of a chaotic week, as the intensifying US-China trade spat threatens turmoil across the global economy and the financial system. Stocks whipsawed, while fear continues to grow that foreign investors are beating a retreat from American assets.

Volatility shows little signs of abating, with concerns that President Donald Trump’s fast-evolving trade policy not only is shaking the globe but threatening the US status as the world’s safe haven. Worries that growth will be derailed sent the greenback to a fresh six-month low. Treasuries headed toward their worst week since the 2019 liquidity crisis in the market for repurchase agreements. The S&P 500 swung between gains and losses.

“The US markets are not trading in the last couple weeks, like their traditional developed safe-haven status,” said Phillip Colmar at MRB Partners. “They’re trading more like a weak emerging-market country. We’re seeing the dollar really slide, and we’re seeing the bond market get threatened here.”

Not since the Covid-19 pandemic has there been this little clarity on what the outlook for economies and earnings will look like, with financial markets descending into chaos, China unleashing retaliatory measures and the US president pausing some levies only hours after they took effect.

Friday brought a fresh signal that consumers were queasy even before Wednesday’s policy shift, with a plunge in sentiment as inflation expectations soared to multi-decades highs.

With tariffs at levels now set to halt most trade between the world’s biggest economies, the concern now is that the economic fight could spill into other areas. China retaliated against Trump’s latest tariffs by hiking duties on all US goods, while calling the administration’s actions a “joke” and saying it no longer considers them worth matching.

As China hiking duties on all American goods, shares of chipmakers with US manufacturing plummeted. Tesla Inc. stopped taking orders in China for Model S sedans and Model X sport utility vehicles — both of which are imported from the US. Meantime, JPMorgan Chase & Co.’s stock traders took in a record haul, boosted by chaotic market moves set off by policy announcements.

US stocks have plunged 7% since Trump announced plans to ramp up tariffs on dozens of countries on April 2. Since then, rather than tumble, 30-year yields have actually risen around 40 basis points, only the fifth time in data going back to the 1970s that moves of this magnitude have occurred simultaneously

“US bond market behavior has been the most worrisome part of price action this week,” said Ajay Rajadhyaksha of Barclays Plc. “Until Treasuries stabilize and start to behave normally, risk assets will struggle, in our view.”

After a week of wild swings in the bond market, China’s holdings of Treasuries are increasingly under scrutiny from analysts around the world.

Some have gone as far as suggesting — without hard evidence — that sales by Beijing may have helped fuel the biggest surge in 30-year yields since the pandemic and subsequent volatility. Others debate whether China might turn to dumping US debt in the future as a response to the steepest American tariffs in a century.

“China may be selling Treasuries in retaliation,” wrote Ataru Okumura, a senior interest-rate strategist at SMBC Nikko Securities in Tokyo, in a note to clients. Should this be the case, China has an incentive to show “it won’t hesitate to cause turmoil in the global financial market in order to improve its negotiating power against the US.”

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