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A historic divergence is unfolding across asset classes, with gold surging to its best presidential-term start since Gerald Ford while U.S. stocks post their worst performance since the same era, and Bank of America’s chief strategist Michael Hartnett says investors are increasingly betting on policy shifts to rescue the market from soft macroeconomic headwinds.
In a note shared Friday, Hartnett outlined how the “second 100 days” of Donald Trump’s 2025 presidency could bring a pivot toward lower tariffs, lower rates and lower taxes — a bullish trifecta for risk assets.
That shift, he said, could revive appetite for equities, even as recession signals persist in the economic data.
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Just a week ago, Hartnett said a sustainable bull market would need three things: lower Treasury yields under 4%, consistent earnings growth above 5%, and a meaningful U.S.-China tariff rollback. His strategy remained: “Stay BIG, sell rips” — favoring bonds, international stocks and gold while fading rallies in U.S. equities.
Gold is the standout performer year to date, up 22%, marking its best opening 100 days since the Ford administration.
In contrast, the S&P 500 is down 0.3%, its worst kickoff since the 1970s, while the U.S. dollar has tumbled 7.6%, logging its steepest slide since the Nixon era.
Notably, gold – as tracked by the SPDR Gold Trust (NYSE:GLD) – logged its fifth straight month of outperformance versus stocks in April, notching both the longest streak since 2009 and the strongest since 2011.
Hartnett attributed the initial market moves to headline-grabbing developments like artificial intelligence excitement, crypto speculation, NATO tensions and “Liberation Day” trades.
Yet, these trades are now “unwinding significantly,” he said, as attention shifts to potential Trump-era economic policies in the pipeline.
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Treasury yields are reflecting expectations of easier monetary policy. The 2-year Treasury yield has fallen 70 basis points since Trump’s Inauguration Day, oil is down 20%, and the U.S. dollar is weakening.