Stocks Sink, Inflation Fears Rise, and Gold Hits Record High

The financial markets took a hit this week as stocks tumbled, bond yields fell, and gold surged to a record high. Investors are grappling with mounting concerns over a slowing U.S. economy and the persistent threat of inflation, exacerbated by a brewing trade war. With just one session left in the quarter, the S&P 500 is set for its worst performance since 2022, sliding 2% on the day. The Nasdaq Composite fared even worse, dropping 2.7%, marking its fifth decline of at least 2% this month. Meanwhile, the Dow Jones Industrial Average sank 1.7% as investor sentiment soured.

A flurry of economic data painted a bleak picture, with U.S. consumer sentiment plunging and long-term inflation expectations surging. At the same time, spending remains tepid while prices continue to rise. The looming rollout of additional tariffs is adding another layer of uncertainty. The VIX, Wall Street’s “fear gauge,” spiked above 21, signaling heightened volatility. Tech stocks bore the brunt of the selloff, with megacaps like Amazon and Alphabet shedding over 4%, while the broader technology sector slumped 3.5%. Lululemon Athletica took a staggering 14% dive after issuing a grim outlook.

The bond market reacted swiftly, with the 10-year Treasury yield sinking 10 basis points to 4.26%, reflecting investor concerns about economic growth. The dollar edged lower, while Bitcoin, a frequent barometer for risk appetite, tumbled 4% to below $84,000. Gold, on the other hand, soared to an all-time high of $3,124 an ounce, as investors sought safe-haven assets amid the uncertainty.

Adding fuel to the fire, President Trump’s trade policies are amplifying concerns about inflation. New tariffs on auto imports have raised fears that rising costs will pressure consumer spending and corporate profits. “Today’s data presents a pattern we may continue to see in the coming months,” said David Alcaly of Lazard Asset Management. “Weaker spending and stronger inflation could weigh on markets if these trends persist.”

Investor sentiment has reached extreme levels, often a contrarian signal for market rebounds. Historically, when sentiment has been this stretched, the S&P 500 has delivered strong gains over the following six and twelve months. Mark Hackett of Nationwide cautioned that volatility is likely to persist until policy uncertainty clears. However, he noted that April has historically provided a seasonal tailwind for equities. “Whether that holds true this year remains to be seen,” he added.

Economists are now dialing back their expectations for U.S. growth in 2025, forecasting softer consumer spending and restrained capital investment amid policy unpredictability. U.S. stock funds saw their largest weekly outflows this year, while European equities continued to attract inflows, according to Bank of America. Despite the current turbulence, UBS Global Wealth Management’s David Lefkowitz maintains that stocks can recover by year-end, albeit at a revised S&P 500 target of 6,400, down from 6,600.

The coming weeks will be crucial for investors as they navigate a landscape shaped by inflation worries, trade policy shifts, and economic uncertainty. With the Federal Reserve monitoring inflation closely and markets awaiting further tariff announcements, all eyes will be on how these factors influence sentiment and market direction. While the road ahead is likely to be bumpy, history suggests that patience may be rewarded in the long run.