Global markets are still reeling, as speculation around new US tariffs caused major declines in all the major indices. As of this writing, the S&P 500 index is down 4.5% this month. Traders in New York are bracing for even more of a rout when Wall Street opens. According to futures market the S&P 500 is now set to open down about 1%. In comparison, Japan’s Nikkei index and South Korea’s Kospi have seen drops of 4% and 3%, respectively.
Goldman Sachs has raised its estimate of the probability of a US recession within the next 12 months to 35%. Investors are rushing for safety in assets such as gold. Consequently, the price has exploded to a historic peak of $3,128 per ounce. The US dollar had its worst monthly performance in more than two years in March. It lost 3.5% of its value against a basket of other currencies.
The looming threat of new tariffs, set to be announced on Wednesday, has stoked fears of an escalating trade war. This ambiguity is raising collective jitters among investors and exacerbating the overall chaos in the markets.
“A selling wave is sweeping across global markets. The tariffs imposed by the US government and the fear of new announcements as early as Wednesday are creating a bleak atmosphere on trading floors worldwide.” – Jochen Stanzl
The Swiss bank UBS has adjusted its forecast for the S&P 500 index, predicting it will close the year at 6,400 points. So far, Goldman analysts have found a historical equity market recession pattern playbook. They indicate that this may portend a 25% pullback from the latest market high. If this trend holds true, specialists anticipate an additional 17% drop from today’s price. This would drop the entire market down to a trough like level of about 4,600.
“The historical equity market recession playbook implies a roughly 25% S&P 500 drawdown from the recent market peak. If followed, this pattern would suggest a further 17% drawdown from today’s price to a trough level of roughly 4,600,” – Goldman analysts
US consumer sentiment has tanked this month, plummeting to its lowest level since 2022. The new unknown tariff rubric is further driving investor angst, as market participants prepare for other new trade barriers.
Even amid this market turmoil, there’s a bullish tint to the outlook for US equities, say some analysts. Mark Haefele, Chief Investment Officer, UBS Global Wealth Management. There is still meaningful upside for broad US equities by year-end.
“This also means that there is still meaningful upside for broad US equities by year-end, in our view.” – Mark Haefele