Can US markets recover from tariff-induced volatility as gold breaks $3000 and crucial data approaches?

_{This article was developed in collaboration between IG's editorial team and AI technology}

US stocks rebound amid tariff tensions

In a volatile week marked by President Donald Trump's tariff policies, Wall Street rallied on Friday, yet the Dow Jones Industrial Average still recorded its worst week since March 2023. Despite the late-week surge, all three major indices closed the week in the red, driven by market jitters over escalating trade tensions.

Tariff tensions roil markets

President Trump's announcement of sweeping "reciprocal" tariffs on 2 April, sent shockwaves through global markets. Billed as a "declaration of economic independence," these tariffs aimed to address trade imbalances but immediately led to market instability, international condemnation, and retaliatory measures from China. The repercussions were swift, with the US 500 entering correction territory, shedding over $5 trillion in market value from its February peak.

Friday's rally and market sentiment

Despite the turbulent week, US stocks rallied on Friday, buoyed by news that lawmakers were likely to pass a government funding plan, thus avoiding a shutdown. The Dow gained 675 points (1.65%), the S&P 500 rose 2.13%, and the US Tech 100 climbed 2.61%. However, this was not enough to offset the week's losses, with the S&P 500 and Nasdaq marking their fourth consecutive week in the red.

Investor sentiment has been dominated by "extreme fear," according to CNN's Fear and Greed Index, as markets grapple with the implications of tariffs, fiscal spending cuts, and softening economic data.

Gold soars as a possible safe haven

Amidst the uncertainty, gold surged to a record high, breaking through $3000 a troy ounce. Investors flocked to gold as a safe haven, driven by concerns over America's economic outlook and geopolitical instability. Former Treasury Secretary Larry Summers noted that gold's rise reflects a lack of confidence in current economic management.

Clarification on tariff exclusions

President Trump attempted to clarify the status of tariffs on high-tech products from China, stating that there was no tariff "exception" and that products would move to a different tariff category. This came after Customs and Border Protection issued a rule sparing certain high-tech items from Trump's "reciprocal" tariffs, leading to expectations of a tech stock rally.

Future uncertainty and economic implications

The mercurial nature of Trump's tariff policies has led to significant market volatility and uncertainty about the US's ability to secure concessions from other countries within the 90-day pause. The unpredictability of these decisions could further erode faith in the US as a reliable economic partner and the stability of the US dollar.

As markets continue to navigate these turbulent waters, the focus remains on potential concessions, the impact on global supply chains, and the broader implications for economic growth and consumer prices. The coming weeks will be critical as investors assess the evolving trade landscape and its effects on the global economy.