The stock market has experienced a significant decline since President Trump’s inauguration, marking the worst start for a presidential term in modern history. Trump’s tariff policies have exacerbated the market’s sharp fall, with the S&P 500 losing 15% of its value since Inauguration Day as of Sunday night. The precedent for such a rapid market decline only exists under George W.
Bush in 2001. Unlike Bush, who took office amidst a declining market due to the dot-com bubble burst, Trump inherited a thriving market. The S&P 500 had gained 23% in 2024.
About two-thirds of the 15% fall in the S&P 500 happened after Liberation Day when Trump alarmed the business world by promising an unprecedented increase in tariffs. Ed Yardeni of Yardeni Research termed these consecutive market falls “Annihilation Days,” reminiscent of the major crashes of 1987, the 2008 financial crisis, and the 2020 COVID-19 crash. The relationship between Wall Street and the broader economy is complex but significant.
More than three in five Americans are involved in the stock market, a sharp rise from less than 25% in the early 1970s.
Market decline under the Trump administration
David Kotok, co-founder of Cumberland Advisors, likened the impact of Trump’s tariffs to the 1973-1974 oil price shock, warning of higher inflation coupled with slow growth or recession.
JPMorgan has increased the likelihood of a recession to 60%, up from 40%. Goldman Sachs raised it from 20% to 45%, while HSBC set it at 40%. The National Bureau of Economic Research will determine whether a recession is official based on various metrics.
Historically, two consecutive quarters of a decline in real GDP also signify a recession. Current forecasts suggest real GDP could fall below zero for the first quarter this year. Confidence is fragile, and the impact on Americans’ investment portfolios could lead to broader economic repercussions.
The economy could suffer further if consumers pull back on spending, making recovery challenging. As the market continues to navigate uncertainty, the potential for a recession looms large, demanding close attention to upcoming economic indicators and policy decisions. The ripple effects on the broader economy underscore the interconnectedness of Wall Street and Main Street.
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