Financial markets experienced heightened recession fears on Friday, marked by a significant global selloff in stocks following U.S. President Donald Trump’s announcement of extensive tariffs. This move spurred a rush towards safe-haven assets like U.S. Treasuries and gold, pushing the latter close to record levels. The volatility in the markets has left investors reeling, as Wall Street faced its most challenging performance since the COVID-19 pandemic.
The turmoil began on Wednesday when Trump revealed the UK’s steepest trade barriers in over a century, prompting investors to seek refuge in government bonds and precious metals. As the week comes to a close, indications of a volatile landscape persist. U.S. stock futures signaled further declines, with the Nasdaq and S&P 500 both showing notable losses after the S&P 500 companies collectively lost $2.4 trillion in value in just one night—the most significant drop since March 2020.
Internationally, major stock indices mirrored U.S. trends, with Europe’s EUROSTOXX 50 and FTSE futures down, as well as Japan’s Nikkei, which plummeted 3.4%, culminating in a two-week loss nearing 10%. Meanwhile, the Asia-Pacific shares saw near-universal declines as many regional markets remained closed for holidays. In response to these developments, U.S. Treasury yields fell sharply, with the 10-year yield hitting a six-month low.
This decline in yields reflected increased bets on Federal Reserve interest rate cuts, which now stand above 100 basis points by December, heightening concerns around economic growth amidst rising stagflation risks. Central banks face formidable challenges in navigating slower growth and increasing inflation, inhibiting their ability to respond effectively. Investors are eagerly awaiting Fed Chair Jerome Powell’s comments, anticipating insights into the outlook for U.S. economic policy.
In the foreign exchange market, the U.S. dollar weakened against major currencies, while gold prices surged, further illustrating the market’s retreat from risk. Oil prices also fell sharply, reinforcing concerns about the economic impact of the new tariffs.