The Wall Street entrance to the New York Stock Exchange (NYSE) is seen in New York City, U.S., November 15, 2022. REUTERS/Brendan McDermid/File Photo
U.S. Markets Face Continued Volatility Amid Widening Tariff Dispute
NEW YORK — April 6, 2025 — Global financial markets are bracing for another week of heightened volatility as fallout from President Donald Trump’s sweeping import tariffs continues to rattle investor confidence. The turbulence follows the most severe week for U.S. equities since the onset of the COVID-19 pandemic in 2020.
Equity Markets Enter Correction and Bear Territory
The S&P 500 Index experienced its sharpest weekly decline since March 2020, while the Nasdaq Composite officially entered bear market territory on Friday, having fallen over 20% from its December peak. The Dow Jones Industrial Average, meanwhile, has declined more than 10%, marking a correction.
The uncertainty stems from President Trump’s announcement last Wednesday of broad new tariffs, which spurred fears of a global recession and triggered a steep selloff across asset classes. With reciprocal tariffs set to take effect on April 9, investors remain on edge, unsure of the broader economic consequences.
“The playbook on this is very, very unclear for everybody,” said Jeffrey Palma, head of multi-asset solutions at Cohen & Steers. “There are all the questions about tariffs, retaliatory tariffs, where this ends and where it shakes out.”
In the immediate aftermath of the announcement, U.S. equities lost over $5 trillion in market capitalization in just two days, according to LSEG data—the largest such decline on record.
Recession Fears Mount Amid Rising Uncertainty
The rapid deterioration in financial markets has prompted analysts to revise their economic outlooks. JPMorgan now estimates a 60% probability of a global recession in 2025, up from 40% previously. Investor confidence has eroded as the scope of the tariffs—up to 10% on all imports and higher, targeted duties on specific countries—becomes clearer.
China intensified the trade dispute on Friday by announcing retaliatory tariffs of 34% on U.S. goods. While some investors hope President Trump will negotiate exemptions or adjustments with individual nations before the deadline, others remain skeptical.
Scott Chronert, a strategist at Citi, noted: “It is not lost on us that the window is shrinking, and some damage to consumer and business confidence may have been done already regardless of the negotiated ending point to follow.”
Investor Sentiment Weakens Further
Investor anxiety is increasingly reflected in key market indicators. The Cboe Volatility Index (VIX), a widely used measure of market stress, closed at its highest level since April 2020. Meanwhile, the American Association of Individual Investors reported bearish sentiment at 61.9%, its highest reading since the global financial crisis in 2009.
The uncertainty has raised concerns about upcoming corporate earnings reports. While S&P 500 companies are projected to show 7.8% earnings growth for Q1 2025, some analysts are warning that future guidance could be more conservative amid deteriorating market conditions.
Major financial institutions, including JPMorgan Chase and Wells Fargo, are set to report results on April 11. RBC Capital Markets has already revised its 2025 earnings forecast for the S&P 500 downward, citing increased economic risk.
Inflation Outlook and Federal Reserve Response
Attention is also turning to the upcoming Consumer Price Index (CPI) report, due Thursday, which may offer insight into baseline inflation trends before the full impact of tariffs is realized. Economists expect the new levies to place upward pressure on prices.
Market participants are increasingly anticipating Federal Reserve intervention in response to economic weakness. Futures markets are now pricing in 100 basis points of rate cuts in 2025, according to LSEG data.
Fed Chair Jerome Powell, speaking on Friday, acknowledged that the tariffs were “larger than expected” and warned that they would likely contribute to both higher inflation and slower economic growth.
Call for Market Stabilization
Despite the prevailing uncertainty, some strategists believe markets may be close to a near-term bottom. Keith Lerner, co-chief investment officer at Truist Advisory Services, stated: “If you had anything that was even remotely positive right now, you could see a short-term spark because people are braced for the negative outcome.”
Palma of Cohen & Steers emphasized the importance of market stability: “We’ve had two really, really big days in terms of sharp market moves. What we really don’t want to see is that this starts to create some vicious cycle that itself destabilizes the financial system.”
As the April 9 tariff deadline approaches, all eyes will be on Washington for any signals of compromise that could help calm global markets.
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