Stock Market in Turmoil amidst Trump's Policies: A Wild Ride and Uncertain Future
Economy shrinks for the first time since 2022, causing stocks to fluctuate
April has been a rollercoaster for the stock market, culminating in a big data release indicating the economy shrank in the last quarter for the first time in years.
The Dow slumped 115 points, or 0.3%, Wednesday afternoon. The S&P 500 fell 0.6% and the tech-heavy Nasdaq Composite slid 1%. Despite some recovery throughout the day, stocks started sharply lower due to fresh Commerce Department data showing the US economy contracted in the first quarter for the first time since 2022.
Stock markets took a hit due to the uncertainties introduced by Trump's policies, causing businesses across the United States to tremble and shattering consumer confidence. However, stocks regained some ground as fresh data showed inflation slowed in March and the Fed's preferred inflation gauge cooled, offering brief reassurance that inflation, while high, has been easing. Trump's tariffs are expected to bump inflation again.
Trump's tariffs caused a steep slump in the stock market, with the S&P 500 plummeting over 11% in the first eight days of April. After turmoil in the bond market and Trump's 90-day pause on most tariffs, the benchmark index has since recovered but is on track to end the month down about 2%.
The Federal Reserve Bank of Atlanta forecasts a sharp decline of 2.7% for US GDP in the first quarter of 2025. This would mark the worst quarter since the Covid era in mid-2020. Trump, on Wednesday, posted on social media, "This is Biden's Stock Market, not Trump's. I didn't take over until January 20th."
Investors are now trying to gauge whether the US will slide into recession in the coming months. While the S&P 500 has gradually emerged from its slump, uncertainty persists about how Trump's trade policy may continue to affect the economy and markets.
Furthermore, companies slowed hiring this month. The private sector added 62,000 jobs in April, down significantly from adding 147,000 jobs in March, according to ADP data. Unemployment concerns remain as investors await Trump Administration's future moves on trade policies.
In comparison, the stock market blazed 5% across Trump’s first 100 days of his first term and 8.5% across President Joe Biden's first 100 days. However, the market during Trump’s second term has been the third-worst performance during the first 100 days of any presidential term in U.S. history.
As markets swing wildly, experts question whether this is merely temporary volatility or a premonition of more turmoil to come. Traditionally, amidst immense uncertainty, investors seek haven in safe-haven assets like US government bonds and the dollar. However, this key relationship broke down during the sell-off in all three American assets.
"The market participants were taken aback by tariffs being much higher than expected," said Charlie Ripley, senior investment strategist at Allianz Investment Management. "This led to market volatility."
Whether the market can continue to serve as a restraint on Trump’s intent to carry out aggressive trade policy is causing debate on Wall Street. "The Trump administration, like others before it in the U.S. and elsewhere, tempers its policies when faced with a nervous Treasury market," said Kit Juckes, chief FX strategist at Societe Generale. However, Juckes added that the desire to reorganize the global trading system may lead to recurring escalations in language as market calms down.
In conclusion, Trump's trade policies have brought significant turbulence to both the US economy and stock market. The market remains volatile, creating unease for investors trying to assess the future trajectory of the economic landscape.
- The stock market's volatile performance in April is likely indicative of the uncertain economic future due to Donald Trump's trade policies.
- The Federal Reserve Bank of Atlanta forecasts a sharp decline in US GDP, suggesting a possible recession in the coming months, which could have a significant impact on Donald Trump's finance policies and investing strategies.
- Companies have slowed hiring due to uncertainties introduced by Trump's policies, which could potentially shatter consumer confidence and further contribute to a possible recession.
- As the stock market continues to swing wildly, investors are likely to gauge the directions of the economy and markets in the coming months, seeking out safe-haven assets like US government bonds and the dollar to protect their investments.
