‘This is sell America’: US dollar, Treasury prices tumble and gold spikes as globe flees US assets

The “sell America” trade is in full swing Tuesday morning after President Donald Trump and European leaders escalated tensions over Greenland.

US bond prices tumbled, sending yields spiking. The US Dollar Index, which weighs the greenback against a basket of six foreign currencies, fell nearly one per cent. The euro jumped 0.6 per cent against the dollar.

“This is ‘sell America’ again within a much broader global risk off,” Krishna Guha, head of global policy and central banking strategy at Evercore ISI, wrote in a note to clients.

Precious metals gold and silver marched to fresh highs. Gold, which has long been viewed as a safe-haven investment during periods of geopolitical turmoil, was on track for its biggest one-day gain since 2020.

US stocks tumbled as investors mitigated exposure to American assets. The Dow Jones Industrial Average slid more than 800 points, while the S&P 500 and Nasdaq Composite each dropped more than 2 per cent. The Cboe Volatility Index (VIX), known Wall Street’s “fear gauge,” spiked to a highs last seen in November.

The latest flare-up in so-called sell America positioning follows Mr Trump’s threats to impose 10 per cent tariffs on eight European countries as part of his push to take over Greenland. Representatives from the 27-nation European Union gathered for an emergency meeting in response to Mr Trump’s tariff call, which he said would start February 1 and then rise to 25 per cent on June 1.

Greenland has repeatedly rejected Mr Trump’s request to purchase the arctic island, with Prime Minister Jens-Frederik Nielsen saying Monday that it would “not be pressured” and “stand firm on dialogue, on respect and on international law.” European officials are reportedly considering using a salvo of counter-tariffs and other punitive economic measures against the US in retaliation.

The “sell America” trade suggests that global investors will place higher risk premiums on US investments amid fears that the US is no longer a reliable trading partner. Following Mr Trump’s latest threats, some investors worry that European countries could dump US assets in a show of power.

“On the other side of trade, deficits, and trade wars, there are capital and capital wars,” Bridgewater Associates founder Ray Dalio told CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland. “If you take the conflicts, you can’t ignore the possibility of the capital wars. In other words, maybe there’s not the same inclination to buy . . . US debt and so on.”

The drop in the US Dollar Index was the largest since Mr Trump’s so-called Liberation Day rollout of sharply higher tariffs in April, many of which were subsequently pared back.

International markets continued to slide Tuesday after starting to retreat on Monday, when US markets were closed for the Martin Luther King Jr. Day holiday. Mr Trump’s latest threats to tariff French wine and other imported goods rattled investors who feared the US would no longer act as an unwavering commercial ally of Europe. The pan-European Stoxx 600 extended its recent decline, following Asian markets into the red.

Mr Guha said the dollar falling and the euro rising suggests that global investors are “looking to reduce or hedge their exposure to a volatile and unreliable” United States. Impacts on the dollar and other US assets could be severe and long-term, if Mr Trump does not walk back his plans — a trade known as “TACO,” or “Trump Always Chickens Out,” that was coined last spring — or find a compromise, Mr Guha said.

“What remains to be determined is the magnitude and duration of these dynamics,” Mr Guha said.

More broadly, investors may be looking for ways to diversify away from US stocks at a time when indexes are near all-time highs and American equities take up a majority of the world’s total market capitalisation, according to Russ Mould, investment director at AJ Bell.

“Markets may already be pricing in full the concept of American exceptionalism, at least barring an epic, crack-up economic boom,” Mr Mould said.

“It may therefore not take too much to persuade investors to hedge their bets and diversify.”

CNBC