The market square at the center of a political reality show
Political turmoil in 2025 caused record volatility in financial markets. The Trump administration's trade wars and unexpected decisions fueled uncertainty, which impacted major stock market indices, especially one of the most important – S & P 500.
The introduction of 25% tariffs on imports from Canada and Mexico and 10% on Chinese goods in March 2025 is likely to become one of the most memorable events of the Trump presidency. This decision impacted not only the political sphere but also the financial one, triggering a market collapse.
The most symptomatic performance in this regard was the S&P 500, which entered a correction on April 4, losing over 20% from its February 19 peak. This was the worst performance since June 2020. Meanwhile, investors, fearing a recession, rushed to safe-haven assets – bonds and the Japanese yen – reflecting deep uncertainty about the stability of the US economy. This makes the S&P 500's rebound all the more interesting.
Balance of tariff wars
President Trump's policies aimed at "revitalizing the American economy" have been met with a response from trading partners. China has restricted exports of rare earth minerals, and the EU has imposed a 50% tariff on American bourbon, which has hit companies dependent on international trade. Faced with the real threat of tariffs, defensive stocks, bonds, and gold have become the preferred tools of market participants.
However, after the announcement of a 90-day tariff suspension for most countries, investors began buying growth assets, especially companies related to artificial intelligence. Market giants such as Nvidia and Microsoft attracted interest, as they were expected to be immune to trade restrictions. As a result, S&P 500 index rebounded 10% – the largest single-day gain since October 2008. This marked a sharp shift towards growth targets and confidence-inspiring technology stocks.
In response to the constant twists and turns
The market reacted to each unexpected action from the White House as if it were a new episode of a reality show, reflecting the polarization of investor expectations. This trend continued even after the most spectacular period of tariff wars ended.
The "Kennedy Jr. effect" illustrates this well. Robert F. Kennedy Jr., for whom he was named, was appointed Secretary of Health and Human Services in the Trump administration. This appointment heightened uncertainty due to his plans for radical reforms in healthcare and environmental protection. Kennedy Jr.'s protectionist rhetoric sparked a sell-off in pharmaceutical stocks like Pfizer (down 12% in a single week this spring), but it also spurred interest in green energy, with First Solar shares rising a staggering 56% in May.
Happy ending?
Despite all this chaos, the S&P 500 has seen an impressive overall rebound, gaining 33% from its April low to July 2025 and reaching a new record high of 6429. This rise was fueled by hopes of tariff easing and a possible interest rate cut by Fed, as well as good quarterly reports, especially from large technology companies.
Concerns remain that persistent uncertainty, rising costs, and weakening global trade could reduce S&P 500 earnings by 2-3% in 2025. Despite these risks, the market is maintaining its upward momentum.
It is worth noting that in this context, diversification and focusing not on short-term price fluctuations, but on long-term profits by focusing on innovations in the field of artificial intelligence, turned out to be key for investors.
The political storm of 2025, from tariff wars to the much-cited "Kennedy Jr. effect," has exposed both the vulnerability and resilience of the S&P 500. Balancing recession fears and optimism, investors are betting on the technology sector and defensive assets, spotting opportunities even in times of chaos.
Author: Marek Górniak, Network Development Manager at Freedom24