⚔️ US stocks vs. gold

What’s going on here?

The Federal Reserve (Fed) saw worse-than-expected inflation and consumer spending figures land on its desk on Friday, and the central bank might need more than the weekend to get over it.

What does this mean?

The Fed pays special attention to “core inflation” readings, which show price changes with volatile contributors like food and energy stripped out. So there was probably a collective “urgh” from the central bank when February’s figure came in at a headier-than-expected 2.8%. That marked a bigger uptick than January’s annual increase, keeping inflation well above the Fed’s 2% target. To make matters worse, consumer spending – which makes up around two-thirds of the US economy – grew by a measlier-than-expected 0.4%.

Why should I care?

For markets: America is divided.

The wealthiest 10% of American households now account for nearly half – yup, half – of the country’s consumer spending. That’s partly down to the whole “rich get richer” thing. Well-off households tend to own more than a few stocks – and over the last few years, US ones have rewarded them handsomely. But now that the outlook for stateside stocks is in doubt, even the wealthiest may swap some spending for window shopping. Remember, consumer spending is the lifeblood of the US economy – so if these big spenders become big scrimpers, the country could be in trouble.

The bigger picture: The US needs a hero.

Many analysts and investors expected the president to tweak policies if the stock market fell. But word from the White House is that the government’s prepared to let stocks suffer in the short term, convinced that the turmoil will make way for a new economic agenda – including rebalanced world trade relationships – in time. Not everyone can afford to wait, though – not the Fed where interest rates are concerned or investors when their money’s on the line.

What’s going on here?

Gold recorded an all-time high of over $3,080 on Friday, with investors racing to protect their portfolios from the possibility of a trade war.

What does this mean?

Investors are nervous: American stocks are wobbling, and the US president’s ever-escalating tariffs could knock them further off-kilter. So they’re putting their faith in gold – the asset known for providing relative stability (almost) no matter what. The precious metal is up 17% this year already. Plus, nearly $13 billion has been pushed into related ETFs – some turnaround from comparable negative figures over the last two years. Even the VanEck Gold Miners index notched a decade high, rising 35% this year. And it’s not just retail investors seeking shelter: central banks worldwide have continued to stockpile gold. That trend – combined with all the interest in ETFs – means that Goldman Sachs now expects the metal to hit $3,300 by the end of the year, up from its previous forecast of $3,100.

Why should I care?

For markets: New year, new president, new strategy.

Investors have been all over the podium, sending silver up by 20% and copper by 28%. And with many doubting that US stocks will continue their world-leading run, they’ve swapped expensive American shares for cheaper European and Chinese ones. Makes sense: the best play is usually to keep your eggs in multiple baskets – or in this case, countries, sectors, and assets. That way, a fall in one area could be offset by a rise in another.

Zooming out: Pay up… someone.

All the new tariffs on the table leave companies with two options: pay the fees themselves or pass them on to customers (or both). The first option could impact broader corporate profit and share prices, while the second risks pushing inflation – and, in turn, interest rates – higher. Investors know this all too well: the president warning American carmakers not to raise prices was enough to send the sector’s stocks south.