Markets Update April 2025 - America's crisis of confidence: Trump's policies are shaking the USA as a safe haven

Donald Trump has achieved something that no US president before him has managed to do - but for good reason, no one has ever attempted it. With breathtaking speed, he has not only put a lasting strain on international partnerships, but has also severely damaged investor confidence in the US as a business location and in US assets.

An unusual pattern can therefore currently be observed on the markets, which should give investors pause for thought. In contrast to previous stock market corrections, neither the US dollar nor long-dated US government bonds are benefiting from the uncertainty and increased risk aversion among investors. US equities are also showing relative weakness in the aggregate, especially from the perspective of euro investors.

On the other hand, the rather “boring” eurozone has taken on the role of safe haven thanks to its political stability and reliability. Both the euro and European government bonds are rising in investors' favor, and European equities are also benefiting from this development. The markets' message to Donald Trump is clear and should be taken seriously: Confidence in US investments is falling.

Trump should also come to his senses - the question is when

This withdrawal of confidence was accelerated after Trump took increasingly harsh shots at Federal Reserve Chairman Jerome Powell and even brought his dismissal into play. A move that would not only be extremely controversial from a legal perspective, but would also finally destroy confidence in the Fed's political independence and lead to serious market turbulence.

Yet both US stock markets and US government bonds have benefited massively from global capital inflows in recent decades, thereby also ensuring wealth growth among private households. Ultimately, Trump is also likely to come to the realization sooner or later that the United States is dependent on global capital flows and must therefore maintain a reliable, investor-friendly environment. However, it remains to be seen how much political and economic porcelain he will smash on the way to this realization.

The gold price as an indicator of uncertainty on the markets

The persistent strength of the gold price also shows that the financial markets are taking a critical view of the situation. It can be interpreted as a vote against the US dollar. This is because the gold price can currently be explained less by traditional fundamental data such as real interest rates or ETF demand - neither of which currently provide any convincing impetus for rising prices. Rather, the trend reflects a deeper uncertainty among market participants.

The withdrawal of confidence in the US dollar and strategic gold purchases by central banks as they continue to shift their reserves away from the dollar point to structural shifts. Historically, an environment of political instability, high risk aversion due to uncertainty and doubts about the sustainability of fiscal budgets (see USA) has provided fertile ground for rising gold prices. It is precisely these factors that are currently at work - and as long as they persist, gold is likely to find support despite the headwinds from traditional price factors.