Stock Meltdown Makes the Biggest Drop Since 2020 – US Market Wrap
The “America First” trade is unravelling amid global market turmoil, with stocks heavily exposed to the US economy falling alongside the dollar. As Wall Street’s outrage over Donald Trump’s tariff war grows, traders rush into fixed-income havens.
The S&P 500 fell about 5% after losing approximately $2 trillion. The Russell 2000 index of smaller firms fell 20% from its all-time high in 2021 on speculation that the president’s trade offensive would harm the American economy. The dollar fell 1.5%, reigniting debate about its haven status during difficult times, as the euro, yen, and Swiss franc rose. Oil has joined the selloff in commodities.
Overall, the much-vaunted America-first trade-buying up assets that benefit when the United States outperforms the rest of the world – is reversing due to concerns that the steepest increase in American tariffs in a century will stifle economic growth.
This is fuelling a strong rally in global bonds, sending benchmark Treasuries’ yields briefly below the closely watched 4% level. Money markets anticipate four quarter-point rate cuts from the Federal Reserve this year, leading to a drop in yields across the board.
Trump has embraced tariffs as a tool for asserting American power, reviving domestic manufacturing, and extracting geopolitical concessions. Economists predict that his measures will result in higher US prices and slower growth, possibly even a recession.
On Friday, Wall Street will be tested by the jobs report and Fed Chair Jerome Powell’s speech, raising concerns about the world’s largest economy’s outlook in the midst of a trade war.
