Tariff Truce Sparks Gold's Retreat and Equity Rally: Time to Rotate Portfolios

The U.S.-China trade negotiations in Geneva this month have delivered a pivotal shift in global markets: a temporary truce in the tariff war is now underway, with both sides agreeing to slash punitive tariffs from 145% and 125% to a baseline of 10% for 90 days. This landmark agreement has unleashed a seismic reallocation of capital—away from gold and into trade-sensitive equities. For investors, the message is clear: the era of "tariff shock" is over, and portfolios must pivot to capture the next wave of gains.

Gold’s Safe-Haven Appeal Fades

The U.S.-China tariff truce has struck a decisive blow to gold’s role as a haven asset. With geopolitical risk now dialed down, the $3 trillion gold ETF (GLD) faces structural headwinds. The Geneva deal has already triggered a 5% drop in gold prices since late April, as investors rebalance portfolios toward risk-on assets.

The math is straightforward: tariffs were a key driver of inflation and uncertainty, which fueled gold’s demand. Now, with tariffs reduced by over 100 percentage points, the immediate threat of supply chain disruptions—and the corresponding inflationary pressures—has eased.

The data will show GLD’s decline and XLI’s surge as the truce took hold.

Equity Rally: Winners in the Tariff Truce

The truce is a goldilocks scenario for trade-dependent sectors:
1. Manufacturing & Industrials: Companies exposed to cross-border supply chains—think Caterpillar (CAT) or Boeing (BA)—will see cost pressures ease and demand rebound. The 90-day tariff pause removes a major overhang on industrial profits.
2. Semiconductors: Firms like Intel (INTC) and Taiwan Semiconductor (TSM) benefit from reduced tariffs on tech components, which could unlock $200 billion in stalled cross-Pacific trade.
3. Agriculture: U.S. farmers exporting soybeans and corn to China (e.g., Deere (DE) and Archer-Daniels-Midland (ADM)) will see trade flows normalize after years of tariffs.

The Fed’s "Tariff Shock Delay" Creates Tailwinds

The Federal Reserve has quietly revised its inflation forecasts downward, citing the tariff truce as a key reason. With trade barriers easing, imported goods costs will moderate, reducing the Fed’s need for aggressive rate hikes. This creates a sweet spot for equities: lower inflation, stable rates, and stronger corporate earnings.

The chart will reveal a downward shift in terminal rate expectations, boosting equity valuations.

Actionable Investment Strategy: Rotate Now

1. Short Gold: Sell or avoid GLD. The ETF’s outflows have already accelerated, and the 10% tariff baseline leaves little room for a "risk-off" rebound.
2. Overweight Trade-Sensitive Sectors:
3. Industrial stocks: Buy the Industrial Select Sector SPDR (XLI) or individual names like 3M (MMM) and United Parcel Service (UPS).
4. Semiconductors: Target the iShares PHLX Semiconductor ETF (SOXX), which could see a 15%+ rally as trade volumes recover.
5. Avoid Tariff-Laggards: Utilities and consumer staples—sectors favored during inflation—will underperform as rates stabilize.

Risks to the Truce Narrative

While the 90-day pause is a milestone, risks linger. China’s demands for permanent tariff removal and U.S. pressure on tech subsidies (e.g., quantum computing) could reignite tensions. Investors should set stop-losses and monitor trade volumes between the two nations.

Conclusion: The Rotation is Here—Act Before It’s Too Late

The U.S.-China tariff truce has tipped the scales from safety to growth. Gold’s decline is only beginning, while equities in trade-exposed sectors are primed for outsized returns. This is a once-in-a-decade opportunity to reallocate capital—don’t let it pass.

Invest now in industrials and semiconductors, and exit gold. The next leg of gains is already underway.