Trade Wars vs Tech Profits: Why Gold is Overshadowing S&P 500
Traditionally, earnings season makes the S&P 500 the centre of the financial universe. However, as of today, markets are grappling with a rare collision of geopolitical and institutional shocks.
Between President Trump’s tariff threats over the Greenland dispute and a Department of Justice (DOJ) probe into Fed Chair Jerome Powell, the traditional anchors of market stability have been shaken.
In this environment, gold shines a beacon, having smashed a fresh historic peak of $4,923 yesterday before stabilising above the $4,840 mark. No longer a defensive play tucked away for a rainy day, it has become the market’s primary volatility valve for cross-asset stress.
Gold vs S&P500: The Leadership Flip
As outlined in our recent analysis, the most telling indicator of this shift is the S&P 500-to-Gold ratio, which has plunged to multi-year lows.
Despite the Magnificent 7 driving S&P 500 earnings growth expectations, the index itself has struggled with a “Sell America” sentiment. Even as equity rebounds — spurred by the cancellation of immediate 25% tariffs on NATO allies — may not hide the structural pivot: the S&P-to-Gold ratio remains stuck near a five-year low of 1.4. A downward bias in this ratio signals that capital is increasingly allocated to assets with liquidity and macro sensitivity rather than pure growth exposure.
Compounding this issue is an unprecedented internal crisis: the DOJ’s criminal investigation into Fed Chair Powell. This friction has led to a risk premium being baked into the U.S. assets. As investors question the future of an independent monetary policy, they are increasingly seeking safer ground in gold.
Geopolitical Shocks as a Catalyst for Gold
Even before the first month of 2026 ends, the global order is already undergoing a series of shocks that seem to redefine market logic. Two particular events this month have fundamentally altered the risk landscape:
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The Venezuela Shock: The January 3 military operation in Venezuela has introduced deep uncertainty into global energy flows and maritime security. While intended to secure energy flows, the move introduced deep uncertainty into maritime security. Although gold initially jumped on the news, the long-term impact is a structural de-dollarisation signal, as unilateral intervention erodes traditional sovereignty norms.
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The Greenland Tariff Crisis: Developments at Davos have been eclipsed by President Trump’s unpredictable announcements of escalating tariffs on eight European allies. When trade routes are weaponised, corporate earnings guidance becomes secondary to capital preservation.
Great Rotation, Rates, and Shift in Capital Flows
Two other macro forces are now driving market behaviour more decisively than individual earnings beats.
First is the great rotation. Technology, the market’s most crowded trade throughout 2025, is showing signs of fatigue as growth slows and valuations come under pressure. Even strong earnings are no longer enough to sustain leadership if guidance hints at margin compression or sensitivity to financing conditions. As a result, capital is increasingly rotating toward sectors such as financials, banks, and consumer names, where earnings visibility and pricing power appear more resilient.
Second is the expectations for the US dollar and interest rates. In this cycle, earnings reports are shaping rate expectations faster than traditional economic data. With the market now split on whether the Fed will hike or pause in the face of political pressure, any tech giant’s supply chain challenge acts as an immediate propellant for gold.
Gold as the Primary Momentum Asset
While strong earnings from major tech names may still dominate headlines, they no longer tell the full story. Since early 2026, the S&P 500 faces a ceiling where even record profits are overshadowed by tariff threats and Fed instability.
For investors and traders, this marks a clear change in focus
