Historic Decline in U.S. Stock Indices Amid Economic Tensions:
The U.S. financial markets have experienced significant turbulence due to escalating economic and political tensions,
leading to a historic decline in U.S. Stock Indices this year.
This downturn has been driven by new tariff-related decisions, deteriorating macroeconomic data,
and sharp volatility in the technology sector. With growing concerns about financial stability,
investors face significant challenges in predicting the trajectory of the markets in the coming period.

Contents

Impact of Tariffs

Stock Market Decline

U.S. Financial Market Performance

Investor Concerns

Negative Outlook

Shift Towards Value Stocks

Global Markets Outperform

Impact of Tariffs on Financial Markets and Currencies

This announcement led to a rise in bond yields and a sharp drop in stock prices,
with the S&P 500 index losing nearly 2% after Trump stated that Mexico and Canada
could not negotiate an exemption from the tariffs set to take effect on Tuesday.
Currencies linked to these countries were also affected, as the Canadian dollar and the Mexican peso fell.
Later, the White House announced that Trump had signed an executive order doubling tariffs on China to 20%.

Stock Market Decline Amid Weak Economic Data

A decline in significant technology stocks negatively impacted the U.S. markets,
which faced additional pressure from weak manufacturing data.
Indices lost their Friday gains, causing the S&P 500 to drop 5% from its record high on February 19.
Markets experienced extreme volatility, with the index swinging between gains and losses
of at least 1.5% over three consecutive sessions, a trend not seen since March 2020.

Economic reports on Monday painted a disappointing picture,
revealing weaknesses in the housing sector, an increase in jobless claims, and a decline in personal spending.

Cryptocurrencies, a key market risk indicator,
also dropped after initially surging the previous day when Trump renewed calls to create a digital asset reserve.

Cali Cox from Ritholtz Wealth Management commented:
“Now is not the time for pessimism but certainly for concern.
There is no concrete evidence of an imminent crash, but the economy is changing rapidly,
and the news cycle is relentless, leaving investors uncertain about what to do next.”

U.S. Financial Market Performance

The U.S. financial markets witnessed a significant decline amid economic and trade pressures.
The S&P 500 index fell by 1.8%, while the Nasdaq 100 dropped 2.2%,
impacted by losses in the technology sector.
The Dow Jones Industrial Average declined by 1.5%, reflecting the prevailing market uncertainty.

Major technology companies suffered notable losses,
with the “Magnificent Seven” index—including Apple, Alphabet, Nvidia, Amazon, Microsoft, Meta, and Tesla—falling by 3.1%.
Smaller companies were not spared from the downturn,
as the Russell 2000 index lost 2.8%, further highlighting investors’ concerns about the future of the U.S. economy.

Additionally, UBS’s basket of U.S. stocks most negatively impacted by tariffs fell 2.9%.

Meanwhile, the European markets told a different story.
They experienced one of their strongest rallies of 2025,
signaling a continuation of the international trading trend that has dominated much of the year.

Wall Street’s Volatility Index (VIX), often called the “fear gauge,” surged to its highest level since December.

All major tech stocks declined, with Nvidia suffering the most significant drop at 8.7%.
Meanwhile, TSMC announced plans to invest an additional $100 billion in the U.S.
based semiconductor manufacturing facilities, aligning with Trump’s push to boost domestic production.

Oil prices fell after OPEC+ confirmed its plans to resume suspended production.
Trump had previously urged the alliance to help reduce prices.

The 10-year U.S. Treasury bond yield fell by five basis points to 4.16%,
while the Bloomberg Dollar Index declined 0.4%. Bitcoin also dropped 9.5%.

Investor Concerns About Market Future

David Kostin from Goldman Sachs warned that any S&P 500 rebound
would likely be temporary due to growing economic concerns.

“Investor exposure to stocks declined last week,
but not yet to a level low enough to be considered a tactical buying opportunity,” Kostin added.

Meanwhile, Florian Ilbo from Lombard Odier Investment Management noted
that markets are increasingly signaling fears of a potential economic slowdown in the U.S.,
emphasizing the importance of Friday’s jobs report, which could significantly impact investor sentiment.

Negative Outlook for U.S. Stocks

Scott Rubner from Goldman Sachs expressed skepticism about the ability of the U.S.
stocks to sustain a lasting recovery, arguing that current investment demand is insufficient to support a new upward trend.

He noted that while markets are undergoing an investment repositioning phase,
they “have not yet reached a turning point that warrants optimism.”

Shift Towards Value Stocks

With weak economic data and continued uncertainty surrounding tariffs,
JPMorgan strategists, led by Mislav Matejka, predict a further rotation away from significant U.S. tech stocks.

Michael Wilson, a strategist at Morgan Stanley, pointed out that U.S. stocks
will likely remain more sensitive to economic growth than bond yields.

Meanwhile, Citi Group strategists, led by Scott Chronert, suggested that earnings estimates for the U.S.
companies do not fully reflect the potential risks of Trump’s proposed tariffs.
However, they emphasized that “focusing on individual sectors
and stocks will be more beneficial than concentrating on broader indices.”

Global Markets Outperform U.S. Stocks in 2025

At the beginning of 2025, global markets outperformed U.S. stocks,
a historically negative indicator for Wall Street’s performance for the rest of the year.

According to Bloomberg Intelligence,
the S&P 500 has never outperformed global markets if it lagged
by more than 2.8 percentage points by mid-February, as seen this year.

Bloomberg Intelligence analysts Gina Martin Adams and Gillian Wolfe described
this trend as “a rare historical red flag against a full market recovery,
given the deterioration of economic fundamentals.”

Historic Decline in U.S. Stock Indices Amid Economic Tensions:

Historic Decline in U.S. Stock Indices Amid Economic Tensions

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