A trader works at the New York Stock Exchange (NYSE) next to a U.S. flag, after Republican Donald Trump won the U.S. presidential election, in New York City, U.S., November 6, 2024.
Andrew Kelly | Reuters
The “Sell America” trade is in full swing Tuesday morning after President Donald Trump and European leaders escalated tensions over Greenland.
U.S. bond prices tumbled, sending yields spiking. The U.S. dollar index, which weighs the greenback against a basket of foreign currencies, fell nearly 1% on Tuesday. The euro, on the other hand, jumped 0.7% compared with 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 — the former of which has long been viewed as a safe-haven investment during periods of geopolitical turmoil — marched to fresh highs.
U.S. stock futures tumbled in premarket trading as investors mitigated exposure to American assets. Dow Jones Industrial Average futures slid nearly 700 points, while S&P 500 and Nasdaq 100 futures each dropped more than 1%.
The dollar index, 1-day
The latest flare-up in Sell America positioning follows Trump’s threats for tariffs on European countries as part of his push to take over Greenland. Representatives from the European Union gathered for an emergency meeting in response to Trump’s call for levies, which he said would start Feb. 1 at 10% before rising to 25% on June 1.
Greenland has repeatedly rejected 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 U.S. as a result.
The Sell America trade suggests that global investors will place higher risk premiums on U.S.-focused investments amid fears that the U.S. is no longer a reliable trading partner. Following Trump’s latest threats, some investors fear that European countries could dump their U.S. assets in a show of power.
The drop in the U.S. Dollar index was the biggest seen since Trump’s so-called Liberation Day rollout last April of extreme tariffs, many of which were subsequently rolled back.
STOXX Europe 600, 1-day
International markets also took a hit on Tuesday as Trump’s latest threats to tariff French wine ratcheted up fears that the U.S. would no longer be a steady trade partner. The pan-European Stoxx 600 dropped around 1% in midday Tuesday trading, following Asian markets into the red.
In particular, Evercore ISI’s 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” U.S. Impacts on the dollar and other U.S. investing classes could be severe and long-term if Trump does not reverse course — a trend known as “TACO” — or find a comprise, Guha said.
“What remains to be determined is the magnitude and duration of these dynamics,” Guha said.
More broadly, investors may be looking for ways to dilute their exposure with U.S. indexes trading near all-time highs and American stocks taking up a lion’s share of the global market cap, according to , 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,” said Russ Mould, investment director at AJ Bell. “It may therefore not take too much to persuade investors to hedge their bets and diversify.”
— CNBC’s Jeff Cox and Chloe Taylor contributed to this report.
