Investors Ditch Stocks as Trump’s Trade Tariff Chaos Reigns
Investors panic as Trump’s tariff uncertainty fuels market selloff and recession fears.
You know it’s a bad day on Wall Street when the only thing rising is the CBOE Volatility Index.
Investors are officially spooked, and the culprit is the usual suspect: trade war uncertainty, courtesy of the Trump administration.
The S&P 500 took a nosedive, slipping 2% in mid-day trading Monday, while the Nasdaq continued its free fall, now over 10% down from its December high. The megacap tech darlings—Nvidia, Tesla, and their Silicon Valley friends—have stopped carrying the market on their backs, leaving everyone wondering if the economic party of the past two years is officially over.
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Investors were thrilled when Trump won the 2024 election, banking on more tax cuts and deregulation. Now, they’re realizing his version of “pro-growth” policies might include sacrificing short-term market stability for long-term trade battles.
“We’ve seen clearly a big sentiment shift,” says Ayako Yoshioka, an investment strategist at Wealth Enhancement. Translation: The market’s honeymoon phase with Trump is over.
It’s not just tech stocks that are taking a beating. The broader market is down more than 2% since the election, and investors who had gone all-in on Trump 2.0 are suddenly hedging their bets. Even Deutsche Bank analysts are bracing for more pain, warning that if market sentiment really sours, we could be looking at an S&P 500 drop to 5,300—a 6% slide from here.
Is Trump Okay with a Recession?
Adding fuel to the fire, Trump himself refused to say whether his policies might tip the U.S. into a recession. And if investors were hoping for a reassuring tweet, they got the opposite: a White House that seems weirdly okay with economic turbulence.
“The Trump administration seems a little more accepting of the idea that they’re OK with the market falling, and they’re potentially even OK with a recession,” says Ross Mayfield, an investment strategist at Baird. That’s not exactly the kind of statement that makes Wall Street feel warm and fuzzy inside.
The Bigger Picture: Uncertainty is the New Normal
Beyond the tariff mess, investors have other headaches: Will Congress pass a funding bill and avoid a government shutdown? What will the next inflation report look like? Is this selloff just a correction, or the beginning of something worse?
One thing is clear—this market was priced for perfection, and perfection is nowhere in sight. Even after the recent selloff, the S&P 500 is still trading at a lofty 21 times forward earnings, well above its historical average of 15.8. That means there’s room for more downside, especially if Trump keeps the tariff chaos going.
As Glenmede strategists put it, “Considerable uncertainty remains over the size and scope of tariffs to be implemented.” And until investors get answers, expect the stock market to keep swinging like a drunk at a pinata party.
The Bottom Line
The Wall Street-Trump love affair is officially on the rocks. Investors wanted tax cuts and deregulation, but they’re getting tariff tantrums and recession fears instead. And with no clear end in sight, it’s anyone’s guess how much worse this selloff could get.
For now, one thing is certain: Volatility is back, and it’s not going anywhere.
That’s the point.
Zahead, Chaos Analyst