NEW YORK, Jan 20 (Reuters) - Volatility measures across asset classes rose on Tuesday as stocks, U.S. long-dated Treasuries, and the U.S. dollar sold off sharply after President Donald Trump threatened to rekindle a trade war with Europe.

On Monday, Trump’s renewed tariff threats against European allies prompted a repeat of the so-called “Sell America” trade that emerged following last year’s “Liberation Day” tariff announcement in April, with investors shying away from U.S. assets.

Wall Street’s most-watched gauge of investor anxiety, the Cboe Volatility Index .VIX, jumped as much as 1.9 points to an eight-week high of 20.69. The options-based index was last up 0.28 points to 19.12. The S&P 500 Index .SPX was down 1.1% at 6,859.

“We’ve certainly seen a meaningful reaction in the risk metrics, since Friday ... it’s a very significant shift,” said Jim Carroll, senior wealth adviser and portfolio manager at Ballast Rock Private Wealth in Charleston, South Carolina.

“But it’s not, you know, hair on fire, kind of reaction at this point,” he said.

“It’s pretty standard reaction to geopolitical turmoil, take equity risk off table, buy gold, buy cash. And that’s kind of what we’re seeing,” Alex Morris, CEO and CIO of F/m Investments.

The VIX index has room to rise further before signaling extreme fear, Morris said.

“We’d have to see (the VIX) go to 30 before anyone in the equity market would really start panicking,” he said.

FILE - President Donald Trump speaks during a signing ceremony in the Oval Office of the White House, Dec. 11, 2025, in Washington. (AP Photo/Alex Brandon, File)

via Associated Press

Even with Tuesday’s surge in market volatility, investor expectations for FX fluctuations remained low by historical standards.

“I suppose the moves ‘feel’ more severe than they might be in reality, simply since the market has been so moribund for so long now,” said Michael Brown, market analyst at online broker Pepperstone in London.

One-month implied volatility for the euro jumped to its highest since November 24 at 6.03%, but was still well below its 52-week average reading of 7.1%, according to LSEG data.

“You’d argue, on that basis, that there is hence room for volatility to continue to rise, especially if this week doesn’t yield much in terms of concrete progress towards Trump unwinding his latest tariff threat, and some off-ramps being found,” Brown said.

(Reporting by Saqib Iqbal Ahmed; additional reporting by Lewis Krauskopf; Editing by Mark Potter and Nick Zieminski)