Consequences of Trump's tariffs: US stocks lose $4 trillion in value!
President Donald Trump's tariffs have spooked investors, with fears of an economic downturn fueling a stock market sell-off that has wiped $4 trillion off the S&P 500's peak last month, when Wall Street was cheering much of Trump's agenda.
A flurry of new Trump policies has increased uncertainty for businesses, consumers and investors, especially the back-and-forth tariff moves against major trading partners like Canada, Mexico and China. Stock market sell-offs deepened on Monday. The S&P 500 fell 2.7%, its biggest daily drop of the year. The Nasdaq Composite fell 4%, its biggest one-day drop since September 2022.
The S&P 500 on Monday closed down 8.6% from its record high on Feb. 19, shedding more than $4 trillion in market value since then and approaching a 10% decline that would represent a correction for the index. The tech-heavy Nasdaq ended Thursday down more than 10% from its December high.
Trump declined over the weekend to predict whether the U.S. could face a recession as investors worried about the impact of his trade policy. Delta Air Lines, which opens a new tab on Monday, cut its first-quarter profit estimates in half, sending its shares down 14% in after-hours trading. CEO Ed Bastian blamed the increased U.S. economic uncertainty.
Investors are also watching to see if lawmakers can pass a funding bill to avoid a partial federal government shutdown. A U.S. inflation report is due on Wednesday.
The percentage of total corporate stocks and mutual fund shares owned by the bottom 50% of the U.S. population, ranked by wealth, stands at about 1%, while the same measure for the top 10% of the population by wealth was 87%, according to data from the Federal Reserve Bank of St. Louis as of July 2024.
The S&P 500 posted consecutive gains of over 20% in 2023 and 2024, led by megacap technology and tech-related stocks like Nvidia and Tesla that have struggled so far in 2025, dragging down the major indexes.
On Monday, the S&P 500 technology sector fell 4.3%, while Apple and Nvidia both fell about 5%. Tesla fell 15%, losing about $125 billion in value. Other risk assets were also punished, with bitcoin down 5%.
Some defensive areas of the market held up better, with the utilities sector posting a daily gain of 1%. Safe-haven U.S. government debt saw little demand, with benchmark 10-year Treasury yields, which move inversely to prices, at around 4.22%.
The S&P 500 has given up all of the gains it had made since Trump's election on Nov. 5 and is down nearly 3% in that time. Hedge funds reduced their exposure to stocks on Friday by the most in more than two years, according to a Goldman Sachs note released Monday.
Investors had expressed optimism that Trump's expected pro-growth agenda, including tax cuts and deregulation, would benefit stocks, but uncertainty over tariffs and other changes, including federal workforce cuts, has dampened sentiment.
Even with the recent sell-off, stock market valuations remain well above historical averages. According to LSEG Datastream, the S&P 500 as of Friday was trading at just over 21 times next year’s earnings estimates, compared with a long-term average P/E of 15.8. Investors’ equity positioning has declined in recent weeks, falling slightly underweight for the first time since briefly reaching that level in August, Deutsche Bank analysts said in a note Friday.
A further pullback to the bottom of the historical range for stock-weighting, as seen during Trump's U.S.-China trade war in 2018-2019, could drag the S&P 500 to 5,300, or another 5.5% from current levels, they added. In another sign of growing investor concern, the Cboe volatility index on Monday hit its highest closing level since August.
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