Stocks Plunge Then Surge: Trade War Chaos Rattles Wall Street

Wall Street had an incredibly volatile day on Monday. It went from a 20% drop that dragged it below its previous record to a sharp rise. But then, the market reverted to losses, as concerns remain over whether Donald Trump’s tariff war will undermine the global economy.

S&P 500 gained 3.4% after a drop of 4.7% shortly after trading began. This would have been its best day for years. The S&P 500 then gave it all up to return to a fall of 1.3% as of 10:00 a.m. Eastern Time.

The Dow Jones Industrial Average fell 736 points or 1.9%, and the Nasdaq Composite was 1.3% lower. Both experienced a dramatic turnaround, with the Dow Jones Industrial Average going from 1,700 points down to nearly 900.

Financial markets are hoping that Trump will ease up on his tariffs. This is causing a lot of volatility.

Investors are hoping that Trump will lower his tariffs following negotiations with other countries. Trump also said on Sunday that leaders were “dying” to reach a deal.

Trump said to reporters on Sunday aboard Air Force One that he hopes markets do not fall. He also said that he was not concerned about a market sell-off. “Sometimes you have to take medication to fix something.”

Trump has cited several reasons for his high tariffs. One of them is to bring manufacturing jobs to the United States. This could be a long-term process. Trump said on Sunday that he wanted the United States to import less from other countries and send more.

In his annual letter Monday to shareholders, Jamie Dimon said, “The recent tariffs are likely to increase inflation and have caused many to consider an increased probability of a depression. He is one of Wall Street’s most influential executives. Whether the tariff menu causes a recession is still in doubt, but it will certainly slow down growth.”

Financial pain has once again hit investments all over the world. Hong Kong’s stocks plunged 13.2%, their worst day since 1997. The price of a barrel of U.S. benchmark crude oil fell briefly below $60, the lowest level since 2021. This was due to fears that trade barriers would cause a weaker global economy. Bitcoin fell below $78,000 after last week’s stability, even though it had surpassed $100,000 in January.

Trump’s tariffs represent an attack on globalization, which has reshaped the world economy and helped lower the prices of products in U.S. retail stores. It also led to production jobs being sent overseas.

This also puts pressure on the Federal Reserve. Investors are conditioned to believe that the Federal Reserve will be a hero in times of crisis. The Fed’s efforts to boost the U.S. economic recovery by lowering interest rates for U.S. companies and households and taking other unconventional steps to stimulate the economy have helped the U.S. recover from the 2008 Financial Crisis, the 2020 COVID crash, and other bear markets.

The Fed could have less flexibility to act because conditions are different. This market downturn, for example, is not due to a coronavirus or a system that was built on the belief that U.S. house prices would continue rising. Instead, it’s largely because of White House economic policies.

Inflation is higher than the Fed wants. While lower interest rates may boost the economy, they can also increase inflation. Trump’s tariffs have already pushed inflation expectations higher.

The Asia Group’s associate, Rintaro Nishimura, said that the plummeting stock prices are due to the uncertainty surrounding the future of tariffs.

Wall Street gives it a name if the S&P 500 closes the day at least 20% below its previous record. A “bear” market is a downward trend that has gone beyond the usual 10% decline, which occurs every few years, to something much more severe.

Since setting a new record less than two months ago, the index that is at the core of most investors’ 401(k) has fallen by nearly 20%. The index is coming off of its worst week since COVID-19 started crashing the global economy in March 2020.

Nathan Thooft is the chief investment officer at Manulife Investment Management and senior portfolio manager. He said that more countries will likely respond with retaliatory duties to the U.S. We believe that, given the number of countries involved in the dispute, it will take some time to negotiate the different issues.

He said, “In the end, we think market volatility and uncertainty will likely persist for a while.”