American Stock Market Tired of Chaos

Yesterday brought significant declines on the US stock market. They particularly hit the technology sector – Nasdaq fell 4 percent, the most since 2022. Tesla shares fell by as much as 15 percent. The market is tired of the chaos related to the process of introducing tariffs, and there are also growing concerns about the occurrence of a recession in the U.S. Today, Donald Trump will meet with the CEOs of the largest American companies and the current situation on Wall Street will certainly be the most important topic of the meeting.

American stock market in the red

The US stock market has been underperforming for some time now; S & P 500 is now 4,3 percent below the level at the beginning of the year. The market has already lost everything it had previously gained since Donald Trump's inauguration. Monday, however, brought an acceleration of the declines. The market began to fear that the economy, which had been doing moderately well so far, could slow down.

Investors are worried about the entire tariff-imposition epic. Just a week ago, when investors finally thought they had a clearer picture of the key elements of U.S. tariff policy, chaos ensued: President Trump imposed 25% tariffs on imports from Canada and Mexico, causing a market panic. A few days later, the White House waived the tariff at the last minute for goods covered by the USMCA agreement, which provided some temporary relief, but another 30-day delay in the introduction of tariffs on cars has added to the confusion. Markets hate such uncertainty, with companies halting investment, retailers warning of price increases, and industries like technology and automotive suffering. Best Buy (BBY) and other consumer giants are already warning of rising costs and the specter of stagnation.

One big chaos

The mix of tariff chaos, implemented and announced spending cuts and federal employee layoffs are all contributing to investor sentiment. Not long ago, these same issues of spending cuts and deregulation were giving markets a boost, but the manner and abruptness of the changes are creating uncertainty that is a serious concern for investors. Uncertainty translates into increased market volatility—the VIX, known as the fear index, is up 20% over the past week, briefly topping 26 yesterday.

Investors' biggest concerns, however, are about recession. The market fears that Trump's and his administration's decisions could push the US into a short-term recession. Such arguments gained additional support last week, as the GDP Now indicator, which measures US economic activity and GDP in real time, showed a reading of -2,8%. After the labor market data came in, it was revised to -1,6%, but the concerns were sown. The model probably does not correctly reflect the current situation in the US economy, and this reading is simply wrong. However, the risk of recession exists and is currently assessed at around 20%. GDP growth forecasts in the US for the whole of 2025 were also lowered from 2,2% to 1,7%.

Inflation concerns are also growing

Goldman Sachs estimates that PCE inflation may even increase to 3 percent (from 2,5 percent in January). At the same time, the head Fed, Jerome Powell, said that with inflation still above 2 percent, interest rate cuts are unlikely to come anytime soon. Good U.S. labor market data on Friday improved sentiment somewhat, but the Fed is taking a wait-and-see approach. Uncertainty about further moves by central banks is driving more volatility in growth stocks, especially in the technology sector, while also supporting more stable financial and dividend stocks.

Summary

It is worth remembering that for Donald Trump, both in his first term and currently, the condition of the American stock market remains an important determinant of the success of his actions. It therefore seems that the declines in the stock market may provoke some reflection and influence the correction of the methods of introducing changes. The markets are convinced that Donald Trump could implement his political agenda without having to generate high uncertainty and chaos. So far, however, such reflection has not occurred, which affects the negative market sentiment. Perhaps today's meeting of Donald Trump with the CEOs of the largest American companies will be an opportunity for this. The meeting was planned earlier, but it is hard to imagine a better moment to discuss the impact of current politics on market sentiment.

Meanwhile, the declines in Nasdaq and technology stocks show that after years of their dominance, 2025 could bring a different balance of power, with markets increasingly leaning towards quality and stability rather than relying on a narrow group of AI stocks.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.