Quick Bite: Share Markets Turn on Trump
Author: Paul Zwi
The S&P 500 closed at an all-time high of 6,144 points just 3 weeks ago – but since then, it has declined by 9% (as at time of writing on 11 March 2025). The Nasdaq has fallen by even more. While we are not yet in “bear market territory,” (usually defined as a fall of 20% or more), we are in corrective mode.
Source: Axios
Interestingly, the US market has now fallen below its close on 4 November, the day before the US election, when investors were uncertain about who would win and what this would mean for corporate profits.
Source: Nate Silver
Narratives move markets. And while it’s true that tariffs and uncertainty created by Trump are doubtlessly creating increased volatility, there are plenty other factors at work. Naturally, the starting point is important (i.e. if you are starting from a point of extreme over-valuation or under-valuation). Cycles of optimism and pessimism over AI are influencing markets, particularly given competition from China in the form of DeepSeek. Geopolitical risks have their influences, too. So do oil prices, bond yields and inflation prints.
Wall Street is increasingly concerned that tariffs and general economic chaos will cause stagflation (stagnant growth and high inflation). Usually, if the economy starts to worsen, help from the government in the form of fiscal stimulus action (lower taxes) and interest rate cuts from the Fed can be counted on to buffer the impact. But Trump administration officials appear willing to tolerate some economic pain as the price of their sweeping policy agenda.
And Jay Powell at the Fed may not be willing or able to cut rates significantly, because inflation has already been well above its target for 4 straight years.
Recent US consumer data weak
Both the Uni of Michigan’s Consumer Sentiment Index and the Conference Board’s Consumer Confidence Index had bad prints in February. These indices can be volatile, but they seem to portend trouble ahead (particularly with expectations rather than with present situation). This parallels a sharp decline in the Atlanta Fed’s GDPNow index, which is projecting a negative Q1 following declines in exports and consumer spending.
Source: Nate Silver
As noted above, narratives move markets. As an example, have a look at Tesla’s stock price, which has practically face-planted as Elon Musk seems to be beginning to really annoy people – including prospective buyers of his vehicles.
Tesla has tumbled
TSLA closing prices since 11 March 2024
Source: Nate Silver
