Trump, Xi, AI, and Market Volatility: Bloomberg Businessweek Daily 2/04/2026

Geopolitical Discussions and Global Order

• 📞 President Trump reported an "excellent" and lengthy call with Chinese President Xi Jinping, discussing trade, military matters, and Trump's upcoming April visit to China.
• 🌍 The call touched upon Taiwan, the Russia-Ukraine war, and Iran, with discussions on agricultural product purchases.
• 🤝 Simultaneously, President Xi spoke with Vladimir Putin, praising ties and discussing the war in Ukraine and US-Iran tensions.
• 🇺🇸 Jennifer Welch of Bloomberg Economics noted that while the US initiates these calls, China is hesitant to play a role in global issues like Russia and Iran, viewing them as strategic partners or vital energy suppliers.
• 🇪🇺 The EU is pitching a critical minerals partnership to the US to curb China's influence, highlighting a broader debate about the US role in the world order.

Domestic Policy and Market Concerns

• 🚨 The Department of Homeland Security is withdrawing 700 agents from Minneapolis to de-escalate tensions following two shootings involving federal agents.
• 📉 Markets experienced pressure, particularly in tech, with the NASDAQ down significantly, driven by concerns about AI's impact on software stocks.
• 📊 Sarah Hunt of Alpine Saxon Woods identified earnings as the primary market risk for 2026, with investors wary of companies not providing strong forward guidance.
• 🤖 The fear of AI disruption is causing knee-jerk reactions in the market, with investors questioning the long-term business models of software-as-a-service companies.

Banking Sector and Economic Outlook

• 🏦 Frank Sorrentino, CEO of ConnectOne Bank, expressed optimism about the US economy and the banking sector, noting ongoing consolidation and foreign capital investment.
• 🤝 He highlighted that consolidation, like the announced acquisition of Webster Financial, creates opportunities for banks like ConnectOne to serve impacted clients.
• 🏗️ Sorrentino remains optimistic about the construction and housing markets, citing a significant shortage of housing inventory in the New York metro area.
• 💰 He also commented on the Federal Reserve Chair nominee, praising a data-driven approach and the need to address the Fed's balance sheet size.

Gold, Silver, and Bitcoin Dynamics

• 📉 Axel Merk of Merk Investments noted that both inflows and price appreciation have contributed to his firm's soaring Assets Under Management (AUM).
• ⚖️ Merk distinguishes Bitcoin as a risk asset highly correlated with the S&P 500, while gold is a defensive asset with a long-term correlation of zero to risk assets.
• ⚠️ He suggested that while Bitcoin's plunge might have some spillover effects, gold has shown a different dynamic and a healthier correction mechanism.
• 📈 Despite a recent pullback, Merk remains unconcerned about gold's performance, citing geopolitical tensions and unsustainable deficits as underlying support.