Investors sell out of US assets as Trump's tariffs destroy confidence | Close of Business | ABC NEWS

Key Concepts

• Sell America Trade: Investors losing faith in the US economy, leading to selling of US assets.
• Inverse Correlation: The expected opposite relationship between asset classes (e.g., equities and bonds).
• US Treasury Bonds: Debt securities issued by the US government, considered a safe haven asset.
• Bond Yields: The return an investor receives on a bond; rising yields indicate falling bond prices.
• Retail Investors: Individual investors, as opposed to institutional investors.
• ETFs (Exchange Traded Funds): Investment funds traded on stock exchanges, holding a basket of assets.
• Dollar Cost Averaging: Investing a fixed amount of money at regular intervals, regardless of the asset's price.
• PE Ratio (Price-to-Earnings Ratio): A valuation metric comparing a company's stock price to its earnings per share.
• US Exceptionalism: The belief that the US is unique and superior to other countries.
• Tariffs: Taxes imposed on imported goods.
• Correction Territory: A market decline of 10% or more from a recent peak.
• Liberation Day: Donald Trump's term for imposing tariffs on countries outside of Russia and North Korea.
• Rules of Origin: Regulations used to determine the country of origin of a product.
• BRICS: An association of five major emerging economies: Brazil, Russia, India, China, and South Africa.
• Safe Haven Asset: An asset that is expected to retain or increase in value during times of market turbulence.
• Margin Calls: Demands from a broker for an investor to deposit additional funds to cover potential losses.
• Bullion: Gold or other precious metals in bulk form.
• Autocracy: A system of government in which one person possesses unlimited power.
• Wolf Warrior Diplomacy: A confrontational style of diplomacy adopted by some Chinese diplomats.

Market Turmoil and Investor Reactions

• The week saw significant market volatility, driven by investor concerns about the US economy and Trump's trade policies. The ASX 200 ultimately ended the week down only 0.3%, with the All Ordinaries index remaining largely unchanged. Year-to-date, the market is down approximately 6%.
• Gemma Dale from NAB Trade noted a concerning trend: equities and US Treasury bonds, which are typically inversely correlated, were both declining simultaneously. This suggests a broader crisis of confidence.
• Bond yields spiked as investors sold off US debt, potentially signaling a lack of trust in the White House's economic policies. The US faces the need to refinance substantial debt, making higher bond yields a significant problem.
• NAB Trade experienced its largest trading day ever on Monday, surpassing even pandemic levels by 10%. This was driven by significant buying activity, particularly in ETFs and materials stocks, as investors sought to "dollar cost average" and capitalize on perceived undervaluation.
• Despite the pullback, PE ratios, especially in the US, remain high, suggesting that stocks may still not be cheap. Forward earnings estimates are strong, but a pullback in earnings could lead to a massive price contraction.
• Investors are holding a lot of cash, indicating a cautious outlook and anticipation of further market declines.

Trump's Trade Policies and Global Impact

• Donald Trump's "Liberation Day" tariffs triggered a $10 trillion two-day sell-off on Wall Street.
• The Australian share market entered correction territory, falling more than 4% in a single day, with finance, energy, and mining stocks particularly affected.
• China responded to US tariffs with a 34% tariff on all imports from the US.
• ANZ Bank predicted that the Reserve Bank of Australia (RBA) might cut interest rates by up to half a percentage point in response to the global market turmoil. Markets are expecting around four interest rate cuts in Australia this calendar year.
• Analysts advised investors to remain calm and avoid knee-jerk reactions, as timing the market is difficult.
• Elon Musk criticized trade advisor Peter Navarro, who retaliated by calling Musk a "car assembler" rather than a genuine car maker.
• Tariffs of 104% were imposed on imports from China.
• Csl stocks fell due to concerns that Donald Trump might announce tariffs on pharmaceuticals, Australia's second-largest export to the US.
• The Australian treasurer held an emergency meeting with financial regulators, who stated that Australia's financial system is strong and resilient despite the uncertainty.
• Trump announced a 90-day pause on tariffs for America's trading partners, citing that "People were getting too yippy."
• Tariffs on China were raised to 125% after Beijing imposed more tariffs on US imports.
• Small businesses in the US are being negatively impacted by the trade turbulence.

Gold as a Safe Haven

• Gold prices have hit record highs in 2025, exceeding $3,000 an ounce (approximately $5,000 Australian dollars).
• Accori Bank analysts suggest gold could reach $3,500 an ounce in the September quarter.
• Gold is seen as an inflation hedge and becomes more attractive when bond yields fall during recessions.
• Investors liquidated gold positions to meet margin calls on other securities, particularly shares.
• Central banks are stockpiling gold, diversifying their reserves away from the US dollar since Russia's invasion of Ukraine.
• ABC Bullion reports increased investor demand for gold due to uncertainty and volatility in other assets.
• There was a rush to buy bullion in the US, with physical gold being transported from London vaults.

US Democracy and Global Order

• Economics professor John Quigan suggests that the US is withdrawing from the international rules-based order under Donald Trump's leadership.
• Quigan believes US democracy is in "pretty bad shape" and that Trump may seek a third term or a "presidency for life."
• He argues that Australia should free itself from alliances with the US and pursue an independent path, balancing relations with both the US and China.
• Quigan predicts that high tariffs will lead to goods being rerouted through third countries to circumvent them.
• He anticipates a continued move away from the US dollar's centrality, with BRICS countries seeking to break away.

Conclusion

The week was marked by significant market volatility driven by concerns over US economic policy and trade tensions. Investors reacted with both panic selling and strategic buying, while gold emerged as a sought-after safe haven. The long-term implications of Trump's policies on the global order and the role of the US remain uncertain, prompting calls for countries like Australia to pursue more independent strategies.