President Donald Trump is continuing his expansive tariff policy despite recent declines in the stock market, exacerbating investor concerns. On Tuesday, he reiterated plans to impose tariffs on goods from Canada, Mexico, and China, causing the S&P 500 to extend its decline.
The S&P 500 fell as much as 2% on Tuesday, ultimately closing down 1.2% at 5,775, now below its closing level of 5,783 prior to the presidential election on November 5. The benchmark index has lost approximately 6% from its recent highs, while the Nasdaq 100, which entered correction territory during trading, closed down 0.4%. The recent declines have erased the post-election gains that had buoyed the market previously.
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During Trump’s initial term, significant sell-offs typically prompted responses to reassure investors. However, this time, Trump and his administration appear to be unfazed by the market’s behavior, focusing instead on the 10-year Treasury yield as a key economic indicator. Treasury Secretary Scott Bessent emphasized this shift, stating, “Over the medium term, which is what we’re focused on, it’s a focus on Main Street.” He noted that while Wall Street is performing well, the administration aims to prioritize the needs of small businesses and consumers.
On Tuesday, the yield on the 10-year bond fell by 4 basis points, driven by concerns that the tariffs would negatively impact economic growth while overshadowing inflation fears. The yield has dropped by 35 basis points in the last 10 days, suggesting that Treasury bonds have surpassed stock performance since the election.
Market analysts initially speculated that Trump would intervene to stabilize the markets in the event of volatility. Bank of America strategists recently referred to the S&P 500’s election day closing figure of 5,783 as a critical threshold, indicating a need for vocal market support from policymakers if stocks fall below this level.
Trump’s communication through his social media platform, Truth Social, has increasingly focused on tariffs, immigration policy, and international affairs, with little mention of stock market conditions. Historically, Trump frequently linked his presidency’s success to stock market performance, highlighting notable gains during his term. However, as of now, the market remains lower than at both his election and inauguration.
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The S&P 500 has seen a market capitalization decrease of approximately $3.3 trillion since its record high of 6,144.15 on February 19, while the Nasdaq Composite closed Tuesday at 18,285, below its November 5 level of 18,439. Additionally, the market has declined 4.3% since Inauguration Day and is down by 6% from its mid-February high.
Stocks that previously benefited during the so-called “Trump bump” have seen notable declines. Tesla, founded by Elon Musk, has fallen by 44% since its all-time high last December, equating to a loss of around $540 billion in market value. Trump’s own media company, Trump Media and Technology Group, is down 32% since the election and 42% since his inauguration.
Financial markets have reacted negatively to Trump’s tariff policies, which have sapped enthusiasm for economic expansion. The economic context shows concerns over slowing growth while inflation remains high, challenging previously optimistic forecasts. The U.S. Treasury yields are currently at levels not experienced since late last year, as investors fear the tariffs will dampen economic activity and the labor market.
Economic indicators have also pointed towards a possible “stagflationary” environment where growth slows but inflation persists. The ISM Manufacturing index, for instance, revealed its highest price levels since June 2022, even while new orders fell into contraction territory.
The first quarter of 2025 indicates a significant reversal in expected market trends post-Trump’s election. The Russell 2000 index, representing small-cap stocks anticipated to thrive under Trump policies, has now declined about 8% since its November 5 close. Energy and industrial sectors have similarly underperformed, falling around 3%, while financials are a lone exception, being up about 7% since the election.
Bitcoin, which had soared following the election, has also lost momentum. After reaching a high of just above $109,000 in mid-January, it is currently trading around $88,000, marking a 20% decline from that peak.
Trump Media & Technology Group stock, which had surged post-election, is now down by approximately 50% since that initial spike. The stock represents the company behind Trump’s social media platform, Truth Social, which he actively uses to engage with the public. Tesla continues to struggle as well, trading below its 200-day moving average for the first time since August 2024, reflecting an over 30% loss since the year’s beginning.
Featured image credit: Austin Li/Unsplash
