The Value of the US Stock Market Drops $4 Trillion as Trump Presses for Tariffs

Investors are alarmed by President Donald Trump’s tariffs, and a stock market purchase has erased $4 trillion from the S&P 500’s top last month, when Wall Street was applauding most of Trump’s program, due to worries of an economic slowdown.

Businesses, consumers, and investors are now more anxious due to a flurry of new Trump initiatives, notably the back-and-forth tariff actions against China, Canada, and Mexico, who are important trade partners.

Ayako Yoshioka, senior investment strategist at Wealth Enhancement, stated, “We’ve seen a big sentiment shift.” “A lot of what has worked is not working now.”

On Monday, the stock market purchase intensified. The benchmark S&P 500 saw its most significant daily decline of the year, falling 2.7%. For the first time since September 2022, the Nasdaq Composite fell 4% in a single day.

Monday saw the S&P 500 settle 8.6% lower than its record high of February 19, losing more than $4 trillion in market value since then. The index is approaching a 10% fall, which would be considered a correction. At the end of Thursday, the tech-heavy Nasdaq had dropped almost 10% from its peak in December.

Over the weekend, as investors feared the effects of his trade strategy, Trump refrained from making any predictions on whether the US would experience a recession.

Peter Orszag, CEO of Lazard, said at the CERAWeek conference in Houston, “The amount of uncertainty that has been created by the tariff wars about Canada, Mexico, and Europe is causing boards and C-suites to reconsider the pathway forward.”

“The portion about Canada, Mexico, and Europe is unclear, but people can comprehend the growing difficulties with China. Orszag stated that this might seriously harm the US economy and M&A activity if it isn’t addressed within the next month or two.

When Delta Air Lines cut its first-quarter profit projections in half on Monday, its stock fell 14% in post-market trading. Ed Bastian, the CEO, cited increased economic uncertainties in the US.

To prevent a partial shutdown of the federal government, investors are also keeping an eye on whether Congress can enact a financing deal. On Wednesday, a US inflation report is anticipated.

Ross Mayfield, an investment analyst at Baird, stated, “The Trump administration seems a little more accepting of the idea that they’re OK with the market falling, and they’re possibly even OK with a recession to exact their broader goals.” “I think that’s a big wake-up call for Wall Street.”

As per the Federal Bank of St. Louis data as of July 2024, the bottom 50% of the US population, ranked by wealth, own roughly 1% of all corporate equities and mutual fund shares, while the top 10% of the population possess 87% of the same measure.

Megacap technology and tech-related firms like Nvidia and Tesla, which have underperformed so far in 2025, drove the S&P 500’s back-to-back gains of more than 20% in 2023 and 2024.

Apple and Nvidia had about a 5% decline on Monday, while the technology sector of the S&P 500 sank by 4.3%. Tesla lost around $125 billion in value when it fell 15%. Bitcoin fell 5%, and other risky assets were penalized.

With the utilities sector recording a 1% daily gain, specific defensive segments of the market fared better. Demand for safe-haven US government paper increased, as seen by the decline in benchmark 10-year Treasury rates, which are inversely correlated with prices, to about 4.22%.

Investor Unease:

Since Trump’s win on November 5, the S&P 500 has lost all of its gains and has fallen by about 3%. According to a Goldman Sachs report issued on Monday, hedge funds cut their equity exposure on Friday for the most significant amount in over two years.

Although investors had been hopeful that Trump’s anticipated pro-growth program, which included deregulation and tax cuts, would boost equities, their euphoria has been tempered by uncertainties around tariffs and other measures, such as government staff layoffs.

Despite the decline, stock market values are still far higher than historical norms. In contrast to its long-term average forward P/E of 15.8, the S&P 500 was trading slightly above 21 times earnings projections for the upcoming year as of Friday, according to LSEG Datastream.

According to Dan Coatsworth, an investment analyst at AJ Bell, many individuals have been concerned about the high valuations of US stocks for a while and are searching for the cause of a market drop. That spark may be a confluence of global tensions, worries about a trade war, and an uncertain economic future.

Per the report released by Deutsche Bank analysts on Friday, investors’ stock posture has deteriorated in recent weeks, falling slightly underweight for the first time since briefly reaching that level in August.

As was the case during Trump’s US-China trade war in 2018–2019, they noted that a further decline to the bottom of the historical range for equities weighting could push the S&P 500 as low as 5,300 or down an additional 5.5% from present levels. The Cboe Volatility index closed Monday at its highest level since August, another indication of mounting market apprehension.

Edward Al-Hussainy, senior interest rate and analyst at Columbia Threadneedle Investments, stated that the government is still attempting to determine a political, economic, and appropriate timeline victory. And it will remain this way each week until they take action.