The US stock market has experienced significant turbulence in recent weeks, losing approximately 17% of its value since peaking in February. The market is now 2% below where it was at this point last year. This rapid decline has sent shockwaves through the investor and economist communities alike. Analysts suggest that the recent turmoil may be linked to President Donald Trump’s unexpected tariff announcements, which are anticipated to inflate prices, decrease demand, and ultimately reduce corporate profits.
The ramifications of these tariff actions have left experts to compare it to the market crash of 1929 at worst. In 1929, for example, the US stock market lost over 20% on a two-day basis—over 2000 points on the current-day DJIA. This cataclysmic disaster set into motion a prolonged economic collapse known as the Great Depression. In less than three weeks, the market crashed by half.
The term “crash” has been used very sparingly in financial circles. Typically it’s defined as a decline of at least 20% from a recent high. This loss can occur in a single day or over multiple days. Save for this recent fall, analysts have been hesitant to call what’s happening a crash. They do warn that sometimes, strong drops like this foreshadow a recession on the horizon.
The international market is taking a hit, too. The UK FTSE index crashed by a staggering 23% in only 2 days. This sudden plunge resulted, at least in part, from its much earlier closing time than the New York markets. On 19 October 1987, the US stock market fell by 23% in a single trading day. That dramatic day would go on to be called Black Monday. Despite the devastating impacts this day brought about, a severe worldwide panic ensued with many international markets experiencing similar losses.
Even with these historical precedents, the current status has still not approached the scale of past crashes. The worry, though still lingering in the air, is that their President Trump’s tariff bombshell would somehow brew another less favorable company’s devaluation. Firms will be less likely to invest. This would lead to lost jobs and other harmful effects on the economy.
The emerging environment is a complicated one for investors. The market has been up and down before. Today’s other unusual circumstances have set off an alarm bell among stakeholders. That potential for inflation from tariffs hangs an immense question mark on future growth and profitability over a wide swath of the economy.