Tariff Threats Shake the Markets
Tariff fears briefly shook markets, but the worst appears to be behind us as equities stabilize. Meanwhile, crypto momentum is fading while gold continues its relentless surge toward $5,000.
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Key Takeaways
- Tariff threats rattled the stock market, but for now, the biggest fears seem to have been left behind.
- The rally seen in the crypto market starts to look like a “fake-out”.
- The price of gold continues its aggressive surge, already approaching $5,000 per ounce.
Quick Recap: The Previous Week
In last week’s Kvarn Pulse newsletter, we estimated that both the equity and crypto markets were beginning to look quite promising. We saw several reasons for optimism and summarized our
assessment into the following points:
- S&P 500 stock index has turned into a clear uptrend, but weakness in the Nasdaq 100 index still raises some question marks.
- The price of Bitcoin appears to have ended its sideways movement and turned into an uptrend.
- Overall, the markets are starting to look quite promising, and the coming weeks are likely to be especially interesting.
As we expected, the following week turned out to be particularly interesting, though in a quite different way than we anticipated.
Threats made last weekend by U.S. President Donald Trump regarding import tariffs on several European countries pushed stock indices into a sharp decline early in the week.
The announcement on Wednesday that these tariffs were being canceled caused prices to bounce back sharply. As a result, after intense volatility, the S&P 500 index is sitting at nearly the same levels as a week ago.
From a technical perspective, the S&P 500 is now in a bit of a "gray zone," and after the early-week drop, it cannot yet be viewed as having unequivocally returned to an uptrend.
The Kvarn X Technical Stock Index has currently shifted from red back to yellow, indicating an unclear trend.
If one had to place bets on the next direction of the stock market, a continuation of the uptrend currently appears to be the clearly more likely option.
Russell 2000 index, representing smaller companies, has continued to chug upward even amidst the tariff threats. As long as the Russell 2000 shows no signs of even a pause in its uptrend, it is difficult to maintain a particularly pessimistic stance regarding the larger indices.
The VIX index, which indicates nervousness in the stock markets, has dropped back toward 16 after the early-week spike. This would suggest that investors have moved past the fears raised by the tariff threats. Until we see the VIX turn back upward, we do not see immediate risks of new downward moves.
Currently, our only question marks relate to the continued weakness in tech stocks.
Nasdaq 100 index has remained in a sideways move, unable to return to a clear uptrend.
Specifically, the price of the MAGS, ETF representing the "Mag 7" group of the largest tech companies, is starting to show signs of an outright downtrend, with the Relative Strength Index (RSI) dipping, at least momentarily, below 40.
As long as the largest tech companies as a whole do not participate more clearly in the upward move, the upside for market-cap-weighted indices seems limited.
In light of equal-weighted indices, however, the situation looks quite bright. Both the equal-weighted S&P 500 and Nasdaq 100 indices appear to be already in a clear uptrend.
In summary, we conclude that the stock market seems to have shaken the tariff concerns, and at the index level, the next direction is most likely upward. Large tech companies, however, continue to lag behind smaller companies, and the tech sector as a whole has not yet returned to the leading role seen last year.
Finally, we remind that the stock market situation is currently acutely susceptible to unpredictable turns caused by geopolitical events. We will continue to monitor the situation and keep you updated!
Bitcoin Back into the Range
Last week, we noted that the price of the largest cryptocurrency, Bitcoin, had made a potential "breakout," breaking out of its trading range of recent months.
At the moment, however, it appears that this breakout was only a short-term "fake-out". Bitcoin’s price was sharply rejected at the $96,000 levels and has returned below $90,000.
We also find it noteworthy that while stock indices bounced back sharply after Donald Trump canceled his tariff threats, Bitcoin's price reaction was significantly more subdued. These are signals that, in our opinion, suggest there is currently not enough risk appetite in the market to pull up a high-risk asset class like cryptocurrencies.
Following this "fake-out," we return to our previous view: we treat price movements between $84,000 and $94,000 primarily as noise and will draw stronger conclusions only once the price breaks out of this range.
Our expectation is also that we are unlikely to see clear upward moves in the altcoin market as a whole before a new Bitcoin breakout.
The total value of the altcoin market (TOTAL2ES) has fallen more steeply than Bitcoin's price, and we expect that momentum from a Bitcoin price increase is needed before altcoins move more forcefully as a whole.
Gold Price Still Rallying
With the crypto market experiencing a lull and the major stock indices still moving sideways, many investors are turning their gaze toward gold, the traditional store of value.
Amidst geopolitical and monetary policy uncertainty, the price of gold continues its seemingly unstoppable march upward. This week, the price per ounce of gold has already been knocking on the $5,000 psychological barrier.
One can get a sense of the strength of the rally by the pace at which even significant industry experts are having to revise their price forecasts.
In October, just as the price per ounce of gold crossed the $4,000 mark, Goldman Sachs—one of the world's most significant financial institutions—raised its gold price forecast for 2026 from $4,300 to $4,900.
At the time, the new forecast could not be criticized for being modest, as it represented a roughly 20% price increase on top of an already strong rally.
However, even this annual forecast became outdated after three weeks of 2026.
Gold prices reached the Goldman Sachs forecast, forcing the financial giant to update its prediction once again—this time upward by about ten percent. It remains to be seen if this forecast will last until the end of the year.
With these thoughts, we leave the reader to observe the very interesting situation in the investment markets, with gold prices rocketing, the stock market giving hints of a return to the upside, and the crypto market still struggling in a sideways move.
We will continue to monitor the situation and return again next week with the Kvarn Pulse newsletter, so stay tuned!
The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.