Trump's Tariffs Spark 3.5% S&P 500 Drop, 4% Gold Surge

President Donald Trump's announcement of tariffs against 25 countries, set to be implemented on April 2, 2025, has sparked significant shifts in global trade dynamics. These tariffs, dubbed "Liberation Day" by the Trump administration, are expected to prompt retaliatory measures from affected countries, further complicating international trade relations. The news has already had a notable impact on risk markets, with the S&P 500 dropping by 3.5% and the Nasdaq 100 seeing a 5% decrease. Meanwhile, gold prices surged by 4%, reaching an all-time high of $3,150 per ounce, as investors sought safe-haven assets amidst the uncertainty.

As the market reacted to the tariff announcements, Bitcoin also experienced a 6% decrease, falling to $81,488. This decline raised questions about Bitcoin's reliability as a hedge against economic crises, reigniting debates about whether Bitcoin or gold is the better safe-haven asset. While Bitcoin's dynamic nature and potential for growth make it an attractive investment, its recent performance suggests it may not yet be a reliable hedge. In contrast, gold has shown strong performance, with a 17% increase since the start of the year, compared to the S&P 500's 5% decrease. This performance is partly driven by a 20-point drop in US consumer sentiment, which has reached levels similar to those seen in 2008.

Investors have responded to the escalating trade tensions by pouring significant capital into gold ETFs, with over $12 billion in inflows recorded. This level of investment in gold funds has not been seen since 2020, highlighting the growing appeal of gold as a safe-haven asset. The short-term price movements of Bitcoin, however, remain heavily influenced by macroeconomic factors, with a 70% correlation observed between BlackRock’s spot Bitcoin ETF and the Nasdaq 100’s price movements. This correlation suggests that Bitcoin's price is still subject to broader market trends, further complicating its status as a safe-haven asset.

Despite these challenges, Bitcoin is increasingly being adopted as a reserve asset by corporations and large investors. Market data indicates that over 80% of BlackRock’s IBIT is held by these entities, with BlackRock itself allocating 1% to 2% of IBIT into its target allocation portfolios. Approximately 5.5% of the total Bitcoin supply is now held by public and private corporations, underscoring the growing institutional interest in Bitcoin. This trend suggests that while Bitcoin may not yet be a reliable hedge, its potential for growth and increasing adoption by major players could make it a valuable addition to investment portfolios.

As global trade tensions continue to escalate, the debate over whether to buy Bitcoin or gold in 2025 remains unresolved. While gold's historical performance and current market dynamics make it an attractive safe-haven asset, Bitcoin's potential for growth and increasing institutional adoption offer a compelling alternative. Investors will need to carefully weigh the risks and benefits of each asset as they navigate the uncertain economic landscape shaped by Trump's tariff policies.