Investors want a chance to catch their breath

Last week, President Trump announced sweeping new tariffs affecting nearly all imports from nearly all countries. The White House called it “the most ambitious economic realignment” in decades, and it’s hard to disagree. But will it be for better or for worse?  

Based on the early action in the stock market, American investors think it’s for the worse.  

The S&P 500, a broad index that reflects the U.S. stock market overall, fell 10.5 percent in the 48 hours following President Trump’s tariff announcement, erasing $5 trillion from the economy.  

It’s not just the U.S. Stock markets in Japan, China, Canada, and Europe tanked in response to the tariffs.  

Economic forecasters are getting nervous. Goldman Sachs raised its recession forecast twice in one week, settling on a 45 percent chance of recession this year. JP Morgan analysts say there is a 60 percent chance of a recession this year, adding that unemployment might reach 5.3 percent.  

 

How bad is the stock market right now? 

The 10.5 percent drop last week was the worst two-day period for the stock market since 2020, when the Covid pandemic shut down the global economy. Here are some other noteworthy two-day drops and how long it took to recover: 

  • In March 2020, the market dropped 14 percent in two days. It only took 19 days to get back to the pre-pandemic highs.  
  • In November 2008, stocks went down 12.5 percent over two days during the Great Recession. It took over 400 days to reach previous highs. 
  • In October 1987, the market fell a whopping 24.6 points over two days, including the worst single-day loss in stock market history. It took 264 days for the market to recover.  

While the market decline hasn’t been the worst ever from traders’ perspective, it has been uniquely bad for President Trump. CNN reports that this is the stock market’s worst start to a presidential term in modern history, with the S&P 500 losing 15 percent of its value since Trump’s Inauguration Day.