Stock Market Decline Pushes Economy Closer to Recession
The U.S. stock market shot up with Donald Trump’s presidential win, but all of those gains have been lost now as the market has steadily declined in the wake of widespread tariffs.
The Dow Jones lost 890 points on Monday and fell 2.08% while the Nasdaq Composite lost 4% and 727 points. The S&P 500 fell by 2.70% and lost 155 points to round out the top three indices. A broad selloff is happening across the United States as there is fear that recession is coming. This is expected to push stock futures a little higher.
The Nasdaq Composite experienced such a bad day of trading on Monday that it was worse than anything since September of 2022. The Dow Jones managed to close beneath its 20-day moving average on Monday, which was something that had not happened since November of 2023. The S&P 500, on the other hand marked Monday as the third consecutive week of losses.
The primary reason for these poor numbers can be traced directly back to tariffs imposed on the U.S. and by the U.S against other countries.
Will The United States avoid Recession?
According to President Trump, the U.S. stock market is going through a transitional period, and he did not seem bothered by the state of the market during a recent Fox News interview. Massive cuts to federal spending have also contributed to the economic downturn alongside the wave of tariffs and overall recession fears.
Consumers are worried about how long these new policies will seriously affect the economy and are wondering whether the president has a plan to reverse the downward momentum of the markets. If the Federal Reserve decides to cut interest rates, that could help give the economy a boost, and there has been some speculation that some of Trump’s moves have been a ploy to force the hand of the Fed in that regard.
The notion that the current administration wants a recession seems unfounded, though, since that would likely entail a federal bailout with stimulus packages and extraordinary government spending, which is exactly what the current administration is trying to avoid.
Whether they want it or not, however, a recession could be coming, and investors need to be aware of that. As low as some of the stock prices are at the moment, they could go much lower. Any investor who believes that the current stock values are as low as those will go may be in for an unpleasant surprise in the coming weeks, since there is no indication that the tariffs will be rescinded.
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