New York
UJ
—
As Wall Street enters a new quarter, a series of tariffs imposed by President Donald Trump are scheduled to take effect. This has generated unease among traders and contributed to the US stock market experiencing its most challenging first quarter in years.
The volatility in Wall Street has intensified this year due to Trump’s tariff proposals, which have kept investors engulfed in uncertainty. The benchmark S&P 500 index has declined nearly 6% for the year, marking its worst start since 2020.
On Monday, US stocks fell further. The Dow dropped by 50 points, roughly 0.1%, pulling back from an earlier decline of approximately 300 points. The S&P 500 decreased by 0.8%, while the Nasdaq Composite plummeted by 1.8%. The S&P 500 momentarily fell into correction territory, showing a 10% drop from its record high in February and hitting its lowest point since September.
Global stocks also declined on Monday as investors braced themselves for Trump’s upcoming “Liberation Day” on Wednesday, when additional reciprocal tariffs are expected to take effect. Economists warn that these extensive tariffs could fuel inflation and impede economic growth.
The full implications of Trump’s tariffs remain unclear, and this uncertainty has placed pressure on Wall Street. Analysts at Goldman Sachs downgraded their year-end projection for the S&P 500 to 5,900 from 6,200 on Sunday, following an earlier cut from 6,500 to 6,200 earlier in the month.
Similarly, Barclays analysts reduced their year-end target for the S&P 500 to 5,900 from 6,600 last week, as Wall Street has been adjusting its forecasts amid increasing worries about how Trump’s tariffs will affect the US economy.
According to Goldman Sachs, the economy is facing a heightened risk of recession as tariffs may stifle growth, raise unemployment, and drive inflation. The bank noted a 35% likelihood of a recession within the next 12 months, up from an earlier estimate of 20%.
As the year began, US stocks were reaching record highs, with many strategists questioning how much further they could rise. Analysts had anticipated that Trump’s policies would initiate a pro-business boom, allowing the stock market to maintain its historic upward trend.
However, Trump’s focus on an economic strategy that emphasizes tariffs has left some investors confused. Unlike during his first term, Trump has not paid the same level of attention to the markets, and investors are also dealing with additional factors, including discussions around the economic impact of the artificial intelligence boom. The tech-heavy Nasdaq Composite has fallen 12% this year and is on track for its worst quarter since June 2022 and the weakest start to the year since 2020.
Meanwhile, gold prices have surged this year, with gold futures in New York crossing a record high of $3,150 per troy ounce on Monday. Gold is viewed as a safe haven during economic instability and a hedge against rising inflation.
With Wednesday approaching, uncertainty about the full impact of the tariffs persists, leaving businesses and consumers on edge. Trump stated on Saturday in an NBC News interview that he “couldn’t care less” if automakers increase prices due to tariffs.
“The administration claims that forging fairer trade relationships is the aim, with reciprocity as the guiding principle for implementing tariffs. Yet, there is little clarity on what this policy will actually entail,” analysts at Morgan Stanley remarked in a note on Monday.
“This is hardly comforting for investors we speak with, who are baffled by the ever-changing dynamics of tariff announcements, negotiations, delays, and varying levels of implementation regarding Mexico, Canada, China, and certain key commodities,” the analysts noted.
On Monday, US government bonds experienced a rally as investors sought safe-haven assets. The yield on the 10-year Treasury note slipped to 4.21%, indicating that investors were purchasing bonds in droves.
“The comments leading up to this point have been filled with mixed messages, keeping uncertainty high, and no one truly knows what to expect,” expressed Thomas Martin, a senior portfolio manager at Globalt Investments.
“We are about to receive an announcement, and we will still lack clarity. I think this uncertainty will be something we have to cope with for a while,” Martin added.
Global markets have been similarly impacted by Trump’s tariffs. In Japan, the benchmark Nikkei 225 faced a 4% drop on Monday, falling into correction territory, down 10% for the first quarter. Taiwan’s main index also dropped over 4% and ended the quarter down 10%.
In Europe, the STOXX 600 index slid 1.4%, while Germany’s DAX index also fell by 1.4%.
Wall Street’s fear gauge, the Cboe Volatility Index (VIX), surged by 9%, reflecting the “extreme fear” that characterized market sentiment on Monday according to UJ’s Fear and Greed Index.
“The crux of the matter is the uncertainty surrounding tariffs and the extent of tariffs and countermeasures that will be announced,” commented Mohit Kumar, chief economist and strategist for Europe at Jefferies, in a note on Monday.
This story is still developing and will be updated.
