Wall Street Slides as Risk Aversion Spikes and Gold and Silver Soar

Quick overview

Donald Trump’s tariff threats against Europe revive fears of a trade war, hit Wall Street, and fuel a sharp rise in risk aversion.

Wall Street posted steep losses on Tuesday, January 20, following Monday’s Martin Luther King Jr. Day holiday, as markets reacted to rising risk aversion triggered by Donald Trump’s remarks on imposing tariffs on Europe and the escalating dispute over Greenland. The exchange of statements between U.S. and European officials has continued to weigh on sentiment, pushing markets lower.

U.S. equities traded sharply down across the board, led by the Nasdaq, which fell 1.6% to 23,096.42. The S&P 500 slid 1.4% to 6,841.97, while the Dow Jones posted a more moderate decline of 1.2%, ending at 48,723.52.

Macro Context

The U.S. president warned that tariffs of 10% would be imposed starting February 1—rising to 25% from June 1—on imports from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland, unless an agreement is reached for the full acquisition of Greenland. He also threatened to levy 200% tariffs on French wine and champagne if President Emmanuel Macron refuses to join the so-called “Peace Board” proposed by Washington for Gaza.

The European Union responded swiftly. Brussels rejected any form of intimidation and, while emphasizing dialogue and diplomacy, made clear that all options remain on the table. These include activating the Anti-Coercion Instrument, which would allow trade restrictions and limits on access to the single market, as well as reviving a €93 billion retaliation package designed during previous disputes with the United States.

From the financial sector, the prevailing mood is one of growing distrust. Confusion and unpredictability best describe the current market environment following Trump’s latest moves.

Adding to the pressure is mounting institutional uncertainty in the United States. Investors are closely watching an upcoming Supreme Court ruling on the legality of using emergency powers to impose broad tariffs—a decision that could spark significant volatility. In addition, a hearing is scheduled for Wednesday on the dismissal of Federal Reserve Governor Lisa Cook, ordered by Trump, amid heightened tensions between the White House and the central bank.

Gold Hits New Highs, Oil Rises

Rising risk aversion is clearly reflected across other markets. Gold, the classic safe-haven asset, surged to fresh record highs, breaking above $4,700 per ounce for the first time, with gains exceeding 3% on the day. Silver also hit a new record, jumping nearly 7% to around $94.72 per ounce.

In energy markets, crude prices moved higher: WTI gained 1.3% to $60.15 per barrel, while Brent rose 1.4% to $64.85, tracking the broader increase in global market tensions.

Japan: Sharp Rise in Bond Yields

In Japan, the yield on the 40-year government bond climbed above 4% for the first time since its launch in 2007, following Prime Minister Sanae Takaichi’s announcement of snap elections scheduled for February 8. The yield on the ultra-long bond jumped 27.5 basis points to 4.215%, while the 30-year yield rose to 3.88%, reflecting growing concerns over Japan’s fragile fiscal position and the government’s ambitious spending plans.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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