The US stock market has fallen sharply in recent weeks, with the Nasdaq composite index leading the way lower, as trade tensions escalate and investors become increasingly uncertain about the Trump administration’s policies.
The tech-heavy Nasdaq index fell 2.6 percent on Thursday, leaving it down more than 10 percent from its record set in December, putting the index in correction territory. The S&P 500, which had gained around 5 percent after Trump’s election win, has also declined sharply, falling by 1.8 percent on Thursday.
Analysts attribute the market’s decline to growing concerns about trade policy and the potential impact of tariffs on inflation. CFRA investment analyst Sam Stovall notes that “once we started getting into the actual administration, the returns weren’t as good,” suggesting that investor sentiment has shifted from optimism to caution.
Commerce Secretary Howard Lutnick claims that imposing fiscal discipline will drive stocks higher, but this message seems out of touch with market sentiment. Historically, the stock market has performed well in the four months following a US presidential election, but this time around, investors are more focused on what’s happening in the financial world than on the administration’s policies.
The S&P 500 declined dramatically after George W. Bush’s and Barack Obama’s elections, highlighting that uncertainty can have a significant impact on market performance. The current situation is dominated by concerns about trade policy, inflation, and tariffs, which are causing investors to second-guess the benefits of the new Trump administration.
Experts warn that investors are closely watching for cracks in the economy and that new data points are giving them cause for concern. A widely followed metric of consumer sentiment has dropped to a seven-month low, while households’ expectations for inflation have increased. Economists expect tariffs to raise inflation, and consumer prices were edging up 3 percent in January.
Investors will be closely watching Friday’s job market report for signs of any weakening in the labor market. The slowest gains since July are raising concerns about the economy’s growth prospects. As one economist notes, “tariff-induced inflation amid slower growth could bring the economy dangerously close to stagflation.”
Source: https://www.washingtonpost.com/business/2025/03/06/trump-stock-market-rally