The S&P 500, a key measure of U.S. stock market performance, is off to a bumpy beginning to this presidential term. This calamity is unprecedented in the scope of their modern history. As of Sunday night, the index is down 15% since Inauguration Day. This dramatic drop has raised concerns among investors and analysts alike. The S&P 500 is up an astounding 23% in 2024. This recent decline has taken it almost into a bear market, which typically signals a drop of 20% from its recent high watermark.
Market experts are alarmed that this swift collapse could precipitate one of the fastest moves into a bear market. This would be a first for any president in modern times. Crucially, a parallel switch occurred in 2001 under President George W. Bush. This was right at the time that the dot-com bubble burst, which led the S&P 500 to fall by 10% in 2000. The prevailing economic situation is only deepening these challenges. That’s why many Americans view the Trump Tariffs 2.0 as the largest tax increase on American consumers in history.
While misnamed Federal Reserve ‘market support’ actions and Wall Street bailouts kept adding to the chaos, it all peaked after President Trump’s “Liberation Day” extravaganza. Prominent economist and market guru Ed Yardeni commented on this development, saying,
“Liberation Day has been followed by Annihilation Days in the stock market.”
This proverb of old serves to summarize the feelings of countless investors these days, who are facing the uncertainty that defines today’s market environment.
Although the S&P 500 hasn’t officially entered bear market territory, the Nasdaq has indeed crossed the 20%-and-counting threshold, entering its first official bear market since 2022. In addition, the Russell 2000 index has similarly been in a bear market as of late. These recent changes are a clear signal that the overall real estate market is starting to experience much bigger headwinds.
As noted by David Kotok, a noted financial guru, to underscore the effects of the Trump tariffs, calling them,
“a massive tax hike imposed as a sales tax on American consumers.”
This is a worrying assertion with respect to what today’s trade policies are doing to shape market competitiveness and consumer choice.
Just this week, JPMorgan raised its odds of recession to 60%. However, such forecasts are a scary prospect for investors who are already fearful of any signs of an economic recession. The S&P 500’s median peak-to-trough loss during recessions is about 27%, RBC Capital Markets found. This new statistic is deeply concerning, suggesting just how far the index could still drop if things really go south economically.
In fact, President Trump himself has interpreted electoral outcomes as a signal to the financial markets of future performance. He suggested that a primary loss may create undue turbulence in the markets, saying,
“If we lost this election, I think the market would go down the tubes.”
His remarks demonstrate a good awareness of how political brinkmanship can shake investor confidence in our economy.
Moreover, Trump has warned of dire consequences should his administration lose power, suggesting it could lead to what he refers to as “a Kamala economic crash, a 1929-style depression.” His remarks highlight his strong conviction that the presence – or absence – of smart political leadership makes an outsized difference in improving economic conditions and investor sentiment.
And as uncertainty continues to hang over the stock market, investors are on edge. Short term tariffs, political rhetoric, and other economic indicators will continue to dictate market movements. Count on these ones to be big drivers of trading decisions. Analysts have warned that unless substantial legislative intervention occurs to stabilize the situation, markets will remain unpredictable.