Global Economic Turmoil Intensifies: US Stocks Plunge, Gold Hits Record High, Safe-Haven Sentiment Spreads

Global Economic Turmoil Intensifies: US Stocks Plunge, Gold Hits Record High, Safe-Haven Sentiment SpreadsAs April 2nd approached, panic gripped global markets, culminating in a dramatic plunge in US stocks on the evening of March 18th. A phone call between Russian President Putin and US President Trump, intended to discuss the normalization of US-Russia relations and the situation in Ukraine, yielded unclear results, further fueling market uncertainty

Global Economic Turmoil Intensifies: US Stocks Plunge, Gold Hits Record High, Safe-Haven Sentiment Spreads

As April 2nd approached, panic gripped global markets, culminating in a dramatic plunge in US stocks on the evening of March 18th. A phone call between Russian President Putin and US President Trump, intended to discuss the normalization of US-Russia relations and the situation in Ukraine, yielded unclear results, further fueling market uncertainty. The call was announced by Russian Presidential Press Secretary Dmitry Peskov, with details promised after its conclusion.

US stocks opened lower and continued to plummet, with all three major indices experiencing significant drops. The Nasdaq Composite fell over 2%, led by a sell-off in technology stocks. Tesla's share price dropped over 5%, AMD fell over 5%, and giants like Nvidia and Amazon saw declines exceeding 2%. However, fueled by safe-haven demand, gold prices surged, leading to counter-trend gains in US-listed gold mining stocks. Barrick Gold rose 2.2%, and Harmony Gold over 3%.

Newly released US economic data showed a 0.4% month-over-month increase in the February import price index and a 0.1% increase in the export price index. These figures exacerbated market concerns about inflation and economic growth. Meanwhile, Chinese stocks listed in the US (Chinese ADRs) also saw adjustments, with the Nasdaq Golden Dragon China Index falling over 1%. However, Tencent Music bucked the trend, soaring after reporting 28.4 billion RMB in total revenue for the past year and announcing a $1 billion stock buyback program, which somewhat boosted market confidence.

The cryptocurrency market also suffered a significant setback. Bitcoin fell below $82,000, a drop of over 3%. Other virtual currencies, including Ethereum and Dogecoin, also declined. According to Coinglass data, over 100,000 traders were liquidated in the past 24 hours, highlighting the widespread panic.

The uncertainty surrounding the global economic outlook prompted investors to seek safe-haven assets, driving a continuous surge in gold prices to record highs. Both London gold and COMEX gold prices rose sharply. A Bank of America survey revealed that institutional investors trading through the bank were exiting the US stock market at a record pace. In March, clients reduced their long positions in US equities by 40%, the largest drop in the survey's history. Bank of America Securities equity strategist Michael Hartnett stated that this trend reflects extreme pessimism about the future economic outlook.

Fitch Ratings, in its latest Global Economic Outlook, lowered its global economic growth forecast for this year to 2.3%, significantly below the trend level and lower than its 2.9% projection for 2024. Fitch also revised down its US economic growth forecast from 2.1% (December 2022) to 1.7% and reduced its 2026 forecast from 1.7% to 1.5%. Fitch noted that tariff increases would raise US consumer prices, lower real wages, and increase business costs, while heightened policy uncertainty would negatively impact business investment. Fitch estimated that the tariff shock would boost US inflation by 1% in the near term and expects the Federal Reserve to delay further easing until the fourth quarter of 2025. Fitch predicts only one rate cut this year by the Fed, but anticipates three more in 2026 as the economy slows and tariff levels stabilize.

The sharp contrast between the US stock market plunge and gold's record high reflects escalating investor aversion to risk assets. Technology stocks, representing a significant portion of risk assets, were particularly hard hit. Gold, a traditional safe-haven asset, saw strong demand and significant price increases.

The Chinese ADR market also experienced adjustments due to the global economic situation. However, Tencent Music's strong performance and announced buyback plan somewhat alleviated market pressure.

The cryptocurrency market's crash highlighted its inherent high-risk, high-volatility nature. The numerous liquidations further amplified market panic.

Fitch's downward revision of global economic growth projections and its forecast for Federal Reserve monetary policy further confirm the serious challenges facing the global economy. Tariff increases and policy uncertainty will negatively impact global economic growth.

In conclusion, the global economic situation is complex and challenging, with geopolitical risks, inflationary pressures, and slowing economic growth intertwining to create heightened market panic. The plummeting US stocks, record-high gold prices, and the cryptocurrency market crash all reflect investor concerns about the future economic outlook. Investors need to closely monitor global economic developments and make cautious investment decisions. Diversification and a robust investment strategy are crucial in this uncertain economic climate. The coming months will continue to present challenges, requiring investors to be prepared for market volatility. The outcome of the Putin-Trump call and future policy measures will significantly impact markets and warrant close attention.