U.S. stocks had their worst day this year, falling sharply in response to President Trump’s tariffs and fears of an impending recession.
The Dow Jones Industrial Average fell nearly 900 points Monday and the big basket of stocks in the S&P 500 tumbled 2.7%. The tech-heavy Nasdaq plunged 4%.
The slump reflected investor worries that a trade war incited by Trump’s tariffs could cause a sustained economic decline. The president, who promised a “golden age” of business last month, over the weekend did not rule out the possibility that his trade policies could cause a recession.
Trump’s failure to quell recession fears in a Sunday interview with Fox News was a “game changer,” said Jennifer Bender, chief investment strategist for State Street Global Advisors in Boston.
“This is, to me, the biggest self-inflicted whiplash that I’ve ever experienced,” Bender said. “ When I think back to the global financial crisis, when I think back to even the dot-com bust, this is the first time I think I’ve actually seen market destruction based purely on policy uncertainty.”
“This is, to me, the biggest self-inflicted whiplash that I’ve ever experienced.”
Jennifer Bender, chief investment strategist for State Street Global Advisors in Boston
She thinks the U.S. will avoid a recession, “ but the fact that the probability of recession has gone up significantly in the last two weeks is pretty alarming — considering that no one thought that was even remotely likely for the last 18 months.”
Ric Thomas, a professor at Suffolk University’s Sawyer Business School, is not optimistic about the economy if Trump’s chaotic tariff rollout persists.
“It’s going to hurt the manufacturing base. It’s going to hurt construction, because you import lumber from Canada and so it’s going to drive up the price of housing,” Thomas said. “It’s going to hurt people that want to buy homes. There’s just very few winners and there’s a lot of losers.”
Adding to the economic concerns locally are federal job cuts, threats from Washington of withholding federal funding in the sciences, education and health care, and news of the chilling effect that’s having on the likes of Harvard University and MIT.
The S&P 500 is on track for a correction, defined as a slide of 10% or more from a recent high — and the Nasdaq slumped similarly as of last week. In response to the market volatility, Goldman Sachs slashed its projection for U.S. growth this year from 2.4% to 1.7%.
The losses are stunning for investors after two years of strong gains under the last administration. Last year, the S&P 500 was up more than 23%, while the Nasdaq rose nearly 29%. Even crypto fell Monday on recession worries, as losses came across most asset classes.
“ The one thing that prevents the stock market from falling farther is that market participants know that Trump pays attention to the stock market,” Thomas said. “So that’s probably keeping a soft floor under the market right now. But the longer this goes on and the more entrenched he becomes in his position, the more damaging it will be.”
Over the last month, Trump has threatened, imposed and delayed tariffs on Canada, Mexico and China, three of the U.S.’s biggest trading partners. Canada instituted retaliatory tariffs, which remained in effect even after Trump put a monthlong pause on planned 25% levies on Canadian imports.
With the global economy interconnected as never before, there is little precedent to help economists predict the effects of Trump’s policies.
“ In the 1970s, ’80s, ’90s, you never really had an instance where you saw tariff policy being used like this,” said Bender, who co-authored a paper on the economic tradeoffs of tariffs. “And that just makes it extremely hard to guess at what’s going to happen.”
A continued decline in the markets could also affect workers’ retirement funds. The hardest hit would be recent retirees.
“ A big downturn early in the retirement years is always a bad thing,” said Yimeng Yin, a researcher at the Center for Retirement Research at Boston College. “If that happens, people need to think about whether they want to stick with a fixed withdrawal strategy, or they need to think about how to adjust their withdrawal, or even lifestyle, to adapt to these kind of changes.”
Americans worried about the hit to their 401(k)s might change their consumption habits, analysts say.
“If you see the wealth of your assets decline when you see the stock prices fall, that induces people to spend less going forward,” Thomas, the Suffolk University professor, noted.
The Trump administration put out a press release Monday afternoon as stocks were plunging, titled “50 WINS IN 50 DAYS.” It touts policies around immigration, tariffs and companies claiming plans to invest in the U.S.
After the market’s close, White House spokesperson Kush Desai said in a statement, “Industry leaders have responded to President Trump’s America First economic agenda of tariffs, deregulation, and the unleashing of American energy with trillions in investment commitments that will create thousands of new jobs. President Trump delivered historic job, wage, and investment growth in his first term, and is set to do so again in his second term.”
