It was a week steeped in geopolitical uncertainty and political maneuvering. Stocks and bonds managed to regain ground, the US dollar declined, and gold experienced its best week since 2020.
While President Donald Trump retracted his recent tariff threats, fueling a sharp rally in equities, investors nonetheless confront the unpredictability of the White House’s methods for achieving its policy aims and the shifting outlook for the global economic order.
Trump’s pivot on tariffs, coupled with turbulence in the Japanese bond market, caused US stocks and Treasuries to decouple from other assets. Wall Street’s fear gauge, the VIX, saw its largest daily jump since October before reversing course.
On Tuesday, the S&P 500 recorded its worst session since October, only to follow up with its best day since November on Wednesday. Overall, the S&P finished the week down a mere 0.35%.
Other markets mirrored the lingering anxiety: Gold, a perennial safe haven amid turbulence, punched through records this week, marking its largest weekly gain in nearly six years. The US Dollar—one metric of investor confidence in America—suffered its worst week since May.
The policy pronouncements from the Trump administration have been sharply impactful on markets this year, and the Greenland saga may yet prove another catalyst for investors to seek hedges against US uncertainty.
“Despite the framework on Greenland and the stabilizing news from the [Japanese bond market], the episode of a coordinated sell-off across US equities, Treasuries, and the dollar may have heightened concerns among global money managers who might be increasing their hedges,” Francesco Pesole, a currency strategist at ING, stated in an email.
Bumpiness of the Week
On Sunday, Trump announced he would impose a 10% tariff on imports from eight European nations starting February 1st, following their opposition to his notion of acquiring Greenland. US markets were closed on Monday in observance of Martin Luther King Jr. Day, and the pent-up tension erupted in the markets on Tuesday. The Dow plunged by 871 points, or 1.76%.
By Wednesday morning, sentiment had already improved. Trump stated he opposed using “force” to acquire Greenland. Later in the day, the President posted on social media regarding a productive meeting with NATO Secretary General Mark Rutte. The proposed tariffs were dropped, and stocks surged. The Dow climbed 895 points over two days, recovering its losses.
“Just as we’ve seen several times over the past year, the President resolved an issue of his own making… and the market reacted favorably,” Matt Maley, Chief Market Strategist at Miller Tabak + Co., remarked in a note.
On Friday, the Dow retreated by 285 points, or 0.58%, closing out the week with a net loss of 0.53%.
Meanwhile, a startling move in the Japanese bond market earlier in the week amplified volatility in US trading. Yields on Japanese government bonds (which rise as bond prices fall) spiked sharply on Tuesday as investors reacted to Prime Minister Sanae Takaichi’s proposal to temporarily cut food taxes and her decision to call a snap election. Investors dumped bonds amid worries over how the government would finance its spending plans alongside new tax reliefs, given Japan’s already massive debt load.
These jitters spilled over into the US Treasury market on Tuesday, coinciding with the dip in stocks and the dollar due to ambiguity over Trump’s tariff plan. Higher bond yields can pressure equities. However, the Japanese bond market settled by Wednesday, easing strain on global markets. This helped US Treasuries claw back some losses on Wednesday, though yields remain slightly higher for the week.
But nerves persist: Gold climbed by roughly 8.4% this week, surpassing $4,700, $4,800, and then $4,900 per troy ounce for the first time ever. The yellow metal is already up nearly 15% year-to-date after a 64% surge in 2025—its best showing since 1979. Silver, another uncertainty hedge, increased by 16% this week and breached $100 per troy ounce for the first time. Silver posted its strongest week since 2020, gaining almost 46% year-to-date following a 141% increase in 2025—also its best performance since 1979.
The Dollar Index dipped about 1.9% this week, erasing its gains for the year and leaving it nearly 10% lower over the last 12 months.
A weaker dollar can support rising gold prices as bullion becomes relatively more affordable for international buyers. Concurrently, central banks worldwide, including in China, continue to boost their gold reserves, reducing reliance on US assets. And the momentum of persistent buyers is becoming a strong force propelling gold higher.
What’s Next?
Investor focus now shifts to the review of fourth-quarter earnings reports. Meta (META), Microsoft (MSFT), and Tesla (TSLA) are scheduled to release results next week. On Wednesday, the Federal Reserve will hold its first policy meeting of the year.
And the rally in US stocks is broadening. The Dow is leading the tech-heavy Nasdaq year-to-date. The Russell 2000 Index, comprising smaller companies, is up an impressive 7.5% this year.
But volatility is likely to remain elevated noted Larry Adam, CIO of Raymond James, citing high stock valuations, investor “excess optimism,” and the US midterm elections later this year.
Steve Sosnick, Chief Strategist at Interactive Brokers, told CNN that the market chop could be beneficial for traders seeking profit opportunities amidst dips. However, it can foster a sense of elevated uncertainty.
“When it comes to major economic or major geopolitical, diplomatic policies, it’s not always easy to deal with if those moves come essentially out of the blue,” Sosnick commented.
“I really do believe that these 180-degree policy shifts are not necessarily in the best interest of markets over the long run,” he concluded.
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