It’s true that the US stock market is on course for its worst first 100 days of any presidential administration in more than half a century. This dangerous trend has the attention of dismayed investors and market analysts. Since President Donald Trump took office on January 20, the S&P 500 has fallen more than 7.8%, resulting in a staggering loss of approximately $3.93 trillion in market value. This drop represents the largest decrease since the administration of President Gerald Ford in 1974.
This year’s market volatility started in February. That’s when the S&P 500 Index hit an all-time peak on January 3 and soon fell into a correction by mid-March. That change happened to line up with the time at which President Trump announced his new tariff policies — leading to a wave of investor uncertainty. Experts argue that Trump’s trade decisions are still a source of uncertainty. This uncertainty is leading to volatile market conditions and further muddying the economic waters.
Market analysts have been quick to identify an interesting pattern that looks to emerge from these tempestuous times. Twelve months ago, we wouldn’t have expected that the best-performing sectors this year would be tobacco and gold, to say the least. In particular, tobacco companies such as Phillip Morris have watched their share prices jump by up to 40%. On the flip side, times are tough for the technology behemoths. Especially the “Magnificent Seven,” which has recently had a significant drop, including Nvidia’s stock tanking by 19%.
Market Performance Amid Uncertainty
The stock market’s rollercoaster performance reflects an increasing concern about corporate earnings. These issues only intensify as we see the shift in policies from the Trump administration. Kelly Bouchillon, a financial analyst with the Urban Institute, emphasized the unique level of this uncertainty.
“I don’t remember a time when a policy was so directly aimed at economic outcomes, where it was received so negatively, universally by the investment community.” – Kelly Bouchillon
Analysts point out that this uncertainty is mostly self-inflicted, due to ever-changing tariff regulations and trade talks. Bouchillon further stated, “It’s the most uncertainty I think we’ve seen around corporate earnings and growth in sometime, all self-inflicted by the administration.”
As a result, the CBOE Volatility Index, known as Wall Street’s fear index, vaulted dramatically in this stretch. The index hit heights not seen since the beginning of the Covid-19 pandemic, highlighting investor fear. The rocky economic situation has caused a lot of investors—especially European VCs—to rethink their plans.
“If you’re a European investor, you will now think twice about allocating strategically to the US.” – Arun Sai
Arun Sai as well pointed out that the S&P 500 has stopped being considered the only and the best investment vehicle. “The S&P 500 is no longer the only game in town,” he remarked.
The Shift to Alternative Assets
With the volatility of US markets, investors have been looking more and more to alternative assets. Gold is one of the most attractive investments you can make right now. This year it has skyrocketed by about 26% and blown past all-time highs. It quickly broke above $3,500 a troy ounce, a big signal of academic or institutional market regime change.
According to Bank of America’s most recent survey, gold was the most crowded trade as of April. That meant the end of two years in which technology stocks dominated. One major move impacting the US is the currency swap agreements, demonstrating increasing worries over the future value of US assets as disruptive trade wars continue.
Vishwanath Tirupattur pointed out that worries regarding foreign investors reducing their exposure to US Treasuries have become central to market discussions. He stated, “The prospect of foreign investors reducing exposure to US assets amid concerns about the continued predominance of US Treasuries as a safe haven has been at the center of market debate over the last few weeks.”
Industry analysts expect this dynamic to last. Joe Zappia commented on the implications of a weaker currency and capital flowing into non-US assets, suggesting it could become a lasting phenomenon.
Broader Economic Implications
As a result, US markets have found it increasingly difficult to compete with their peers on both sides of the Atlantic and the Pacific. The real effective US dollar exchange rate has dropped precipitously. The US dollar index has fallen 8.5% so far this year. This drop is raising alarms about its long-term prospects as an asset class.
Additionally, the yield on the 10-year Treasury note has seen significant volatility. It subsequently fell to 4.22%, having spiked above 5% earlier in the month. This dip is indicative of all investors moving toward flight to safety assets due to increasing concerns.
Financial analysts have cautioned that more volatility could be on the way as economic conditions continue to change. Terry Sandven expressed caution about potential future weaknesses, stating, “We could still have some weakness in front of us, but at a minimum, we’ve got volatility until visibility around tariffs starts to improve.”
Then Jonas Goltermann dropped even more knowledge bombs about the challenges that await us. “Given the ongoing uncertainty around US trade policy and the economic outlook more broadly, we suspect the going will get tougher from here,” he said.