Following Donald Trump’s victory in the presidential election last November, the financial markets responded with enthusiasm. His focus on deregulation and his perceived expertise in business led to remarkable performance across various sectors, causing a surge in stock values as the new year began.
Between the election and January 21, when markets reopened after Inauguration Day, the Dow Jones Industrial Average experienced a remarkable increase of 5.34%, the S&P 500 rose by 5.9%, and the Nasdaq climbed by 8.67%. This phenomenon, often referred to as the “Trump bump,” dominated the news cycle and appeared to provide significant momentum to the ongoing bull market that had initiated in late 2022.
However, this rally was short-lived. After Trump’s first 100 days in office, the market narrative shifted dramatically, reversing all post-election gains. As of the latest report, all three major indices had dipped below their values from any time following Election Day and prior to the start of the president’s second term. Concurrently, market volatility reached a five-year peak, forecasts for GDP declined sharply, the value of the U.S. dollar plummeted, and consumer sentiment turned increasingly bearish amidst rising fears of a potential economic recession.
As investors continue to anticipate the president’s promise of an unprecedented economic “boom,” it’s essential to explore how the initial Trump bump transitioned into the current Trump slump.
How Tariffs Disrupted Market Stability
Recently, the Wall Street Journal revealed that the performance of the S&P 500 since Inauguration Day has marked the worst start for any president since 1928. The article also indicated that the index was on course for its most disappointing April—historically a robust month for stock market performance—since the Great Depression in 1932.
After reaching an all-time high on February 19, the S&P 500 experienced a significant drop of 10.13% by March 13, driven by anticipation surrounding Trump’s anticipated tariff announcement. Following a brief rebound, losses intensified at the beginning of April.
With the market shrouded in uncertainty, investment expert Chip Rewey, chief investment officer at Rewey Asset Management, urges investors to adopt a longer-term perspective. According to him, “I would encourage investors to lengthen their time horizons, which can make the ongoing tariff battle a little easier to navigate,” he advises. “Day-to-day fluctuations can leave you at the mercy of a tweet.”
The unpredictability of Trump’s messaging was starkly illustrated on April 2, when he formally announced the expansion of tariffs. The market’s response to this announcement was severe: a record-setting two-day sell-off from April 3 to April 4 erased a staggering $6.6 trillion in investor wealth. However, on April 9, Trump attempted to mitigate the situation by declaring a 90-day pause on new tariffs (excluding those against China), which momentarily boosted equity prices.
Despite these temporary reprieves, the downward price trends observed over the past two months have not been sufficient to recover the initial losses incurred. According to the fintech data platform Unusual Whales, the Dow has recorded single-day declines of 1,000 points on 11 occasions throughout its history, with four of those instances occurring since Trump’s tariff announcements.
In stark contrast, since assuming office in 2025, there has only been a single day where the Dow gained 1,000 points.
In March, while discussing the implications of tariffs on the stock market, Trump remarked, “I’m not even looking at the market, because long-term, the United States will be very strong with what is happening here.”
However, following the unprecedented market sell-off, Trump sought to reassure investors on April 6 by stating, “I don’t want anything to go down, but sometimes you have to take medicine to fix something.”
The 90-day tariff pause further complicates an already murky outlook. The sentiment survey conducted by the American Association of Individual Investors indicates that bullish sentiment has fallen below its historical average for 15 of the past 17 weeks, while bearish sentiment has surged by 101.66% since Trump’s election.
Moreover, numerous Wall Street firms have adjusted their year-end price targets for the S&P 500, citing growing uncertainty surrounding tariffs, inflation, and potential economic contraction. For instance, investment bank Jefferies has revised its S&P forecast down to 5,300 from 6,000, reflecting a 3.4% decrease from the current index level. Historically, the S&P 500 typically grows by an average of 10% each year.
With the president’s actions under close scrutiny, investors are searching for clear cause-and-effect relationships.
“The markets have become very short-term focused,” Rewey comments. “But the long term is essentially a series of short terms, and what we’re witnessing now is a revealing glimpse into the complexities of market dynamics.”
Federal Reserve Criticism Heightens Market Anxiety
While tariffs alone contribute to heightened investor apprehension and declining prices, the president’s public statements wield considerable influence. This was evident last week when he publicly criticized Federal Reserve Chairman Jerome Powell on social media.
On April 21, Trump’s remarks resulted in a staggering $1.4 trillion loss in market value. He used Truth Social to express his discontent with Powell, whom he appointed in 2017, advocating for the chairman’s removal before his term’s conclusion in 2026.
This social media outburst sent shockwaves through the markets. Major indices fell under selling pressure as investors abandoned U.S. assets, coinciding with Trump’s renewed calls for the Fed to lower interest rates amidst a weakened U.S. dollar and rising Treasury rates.
As a result of Trump’s attempts to pressure the Fed’s monetary policy, the S&P 500 plummeted nearly 3% on April 21. Yet, following the market’s reaction, Trump moderated his stance, stating that he had “no intention” of dismissing the Fed chairman, despite reports suggesting the White House was exploring legal avenues to do so. The stock market rebounded in response, but the initial damage remained substantial.
This emerging pattern of threats followed by retractions has intensified uncertainty and contributed to negative market sentiment—elements that Rewey directly associates with the ongoing market correction.
“When [Trump] introduces such a degree of uncertainty in the short term,” he asserts, “I believe the market has declined as a direct result of that.”
Preparing for Continued Market Volatility
Given the current environment of uncertainty, predicting the market’s correction timeline and potential recovery is challenging when compared to historical instances.
“This situation is self-inflicted,” Rewey explains. “In this regard, it differs from the COVID crisis or the financial crisis of 2007-2009 because this can be reversed through policy adjustments.”
However, without clear direction, the repercussions of Trump’s tariffs and his public disparagement of Powell have caused economists to reevaluate the likelihood of a recession occurring this year. Torsten Sløk, chief economist at Apollo Global Management, has indicated that the chances of a self-induced voluntary trade reset recession (VTRR) now stand at a staggering 90%.
Sløk emphasized that sudden tariffs will disproportionately affect small businesses, which currently represent over 80% of U.S. employment.
In a recent post on the company’s website, Sløk noted that despite the administration’s inheritance of a robust economy characterized by 4% unemployment, positive hiring trends, and favorable investment conditions, “we should expect ships to remain anchored offshore, orders to be canceled, and well-managed, generational retailers to face bankruptcy.”
He also identified eight factors that, if unresolved, will continue to pose significant challenges for the U.S. economy. These include rising tariffs, uncertainty regarding their permanence, retaliatory tariffs, decreased tourism, diminished consumer confidence, and reduced corporate confidence.
Sløk’s downward revisions are echoed by the International Monetary Fund, which now projects U.S. economic growth at a modest 1.8% for the year, a decline of 0.9% from its pre-tariff estimates. As these impacts become evident, they could lead to increased volatility in the equities market and persistent bearish trends.
Due to the unpredictable nature of Trump’s communications, Rewey believes that investors will need to adopt a wait-and-see approach before comprehensively understanding how developments unfold.
“Time will bring clarity,” he states. “Be prepared to invest capital opportunistically in long-term strategies, and consider time an ally in your investment journey. Don’t let short-term fluctuations dictate your decisions.”
Additional Insights from Money:
Recent Trends: S&P 500 and Nasdaq Exhibit Alarming ‘Death Cross’ Patterns
Market Dynamics: ‘Anything Works in a Bull Market,’ but What Happens in a Bear Market?
Financial Planning: Can Cutting Back on Avocado Toast and Lattes Truly Enable Homeownership?
