On Monday, US stocks experienced a significant downturn, opening sharply lower following comments from President Donald Trump regarding the state of the US economy. In an interview on Fox News’ “Sunday Morning Futures With Maria Bartiromo,” Trump indicated that the economy may undergo “a period of transition” and did not dismiss the possibility of a recession this year.
When pressed about the likelihood of a recession, Trump stated, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.” His remarks contributed to a market drop, with the Dow Jones Industrial Average falling by 411 points, or 0.96%. The broader S&P 500 index declined by 1.4%, while the Nasdaq Composite experienced a 1.95% drop.
The stock market has faced intense pressure this month, primarily due to the uncertainty surrounding Trump’s inconsistent tariff policy. The S&P 500 saw a decline of 3.1% last week, marking its worst week since September. Recently, Trump threatened to impose substantial tariffs on imports from Canada and Mexico but announced a temporary reprieve until April 2. Additionally, he raised the tariff on all Chinese imports from 10% to 20% and set a 25% tariff on steel and aluminum imports, effective March 12.
Further complicating matters, Trump suggested last week that he might implement a staggering 250% tariff on Canadian dairy products and a “tremendously high” tariff on lumber. During the Fox interview, he indicated that tariffs could increase over time, stating, “tariffs may still go up as time goes by.”
David Bahnsen, chief investment officer at the Bahnsen Group, commented on the situation, saying, “The talk of tariffs is, in a lot of ways, worse than the implementation of them.” He emphasized that the ongoing discussions surrounding tariffs, along with reversals and speculation, create an environment of uncertainty in the market. Bahnsen further noted, “I do not believe the administration knows how the tariff situation will play out, but if I were a betting man, I would say that it will persist long enough to do damage to economic activity for at least a quarter or two.”
He concluded that this turmoil would likely lead to an eventual deal with other countries, leaving many to wonder why such chaos was necessary in the first place.
Amidst the turmoil in the stock market, other signs of economic strain are becoming evident. Layoffs are increasing, hiring is slowing, consumer confidence is declining, and inflation is on the rise. This week, investors are closely monitoring monthly inflation data scheduled for release on Wednesday and Thursday, which will provide insights into whether inflation remained stubborn in February.
A recession is typically defined by two consecutive quarters of negative growth in gross domestic product (GDP). The National Bureau of Economic Research’s Business Cycle Dating Committee describes a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
Sam Stovall, chief investment strategist at CFRA Research, shared his perspective on the current situation, stating, “How long this period of investor caution persists depends on how quickly it will take the global trade clouds, and the resulting threat of recession, to dissipate.” Investors remain cautiously optimistic but vigilant as they navigate these turbulent economic waters.
