By Lewis Krauskopf
NEW YORK (Reuters) – Fears that uncertainty over trade tariffs will spark an economic downturn are causing investors to flee equities, in a major shift for Wall Street which had been fired-up by the prospect of President Donald Trump’s agenda.
Stocks continued their steep decline on Monday, with the benchmark S&P 500 down 2% in mid-day trade and the Nasdaq Composite sliding more than 3%. The S&P 500 was down about 8% from its February 19 all-time high, nearing a 10% decline that would show a correction for the index. The tech-heavy Nasdaq ended down more than 10% from its December high last week.
The S&P 500 tallied back-to-back gains of over 20% in 2023 and 2024, led by megacap technology and tech-related stocks such as Nvidia and Tesla that have struggled so far in 2025 and dragged major indexes down with them.
“We’ve seen clearly a big sentiment shift,” said Ayako Yoshioka, senior investment strategist at Wealth Enhancement.
“A lot of what has worked is not working now.”
Investors are grappling with a barrage of new policies from the new Trump administration, particularly in trade where back and forth on tariff policy has increased uncertainty for businesses, consumers and investors.
Trump over the weekend declined to predict whether the U.S. could face a recession amid stock market concerns about his tariff actions on Mexico, Canada and China.
“The Trump administration seems a little more accepting of the idea that they’re OK with the market falling, and they’re potentially even OK with a recession in order to exact their broader goals,” said Ross Mayfield, investment strategist at Baird. “I think that’s a big wake up call for Wall Street.”
The S&P 500 has given up all of its gains since Trump’s November 5 election, and is now down more than 2% in that time. Investors had expressed optimism that Trump’s expected pro-growth agenda including tax cuts and deregulation would benefit stocks, but uncertainty over tariffs and other changes including federal workforce cuts, have dampened sentiment.
INVESTOR UNEASE
“It was the overwhelming consensus that everything was going to be this great environment once President Trump came into office,” said Michael O’Rourke, chief market strategist at JonesTrading.
“Every time you have structural change you’re going to have uncertainty and you’re going to have friction,” O’Rourke said. “It’s understandable people are starting to be a little concerned and starting to take profits.”
