Under Trump's presidency, stocks have experienced a decline, and Bitcoin has seen a significant drop. What's behind thesefinancial shifts?
US stocks faced a downturn on Tuesday, with the consumer confidence index from a survey showing a significant decrease and heightened worry about inflation. The Conference Board's consumer confidence index experienced its largest monthly decline since August 2021.
The Dow dipped 0.2% in the morning after initially opening higher, while the S&P 500 and the Nasdaq Composite saw drops of 0.75% and 1.5% respectively by midday.
Anxiety surrounding lingering inflation concerns and uncertainty around President Donald Trump's trade and tariff policies have been causing concern among investors. In fact, investor sentiment moved into extreme fear territory for the first time since December, as per CNN's Fear & Greed Index.
The VIX, Wall Street's fear gauge, shot up by 10% on Tuesday, reaching its highest level this year. The S&P 500 has closed lower for three consecutive sessions, and all three major US stock indexes have been in the red since Trump assumed office in January 2020. The Nasdaq has even lost almost 2% since the beginning of 2025.
As worries deepen, investors seem to be shifting their focus towards safer assets like government bonds and selling off riskier ones like cryptocurrencies. Bitcoin, which had surged to around $106,000 near Trump's inauguration, has decreased by about 17% in the past month, currently trading around $87,000 on Tuesday.
The yield on the 10-year US Treasury bond slid to 4.3% as investors were quick to buy bonds, expressing concerns about uncertainty and weaker-than-expected economic growth.
Last week, Walmart spooked investors by announcing slower sales expectations for 2025 compared to earlier projections.
While US stocks appear to be reaching their limits, global markets are thriving. Europe's STOXX 600 Index has added nearly 10% this year, and China's equities continue to outperform the US.
Goldman Sachs analysts observed in their February 25 note that the release of DeepSeek's LLM has sparked renewed interest in China tech, boosting the sector by more than 35% from its January low. Moreover, developments around Ukraine have led to a surge in performance for European tech companies and those associated with potential reconstruction.
Since Trump's election wins, the Dow and S&P 500 have continued to climb, remaining slightly in the green since the start of 2020. However, the question remains whether the bull rally will endure in 2025.
Tech stocks, which had driven US indexes upwards in 2024, have seen a downturn in recent days. Nvidia, Palantir, and Tesla were among the stocks leading the selloff on Tuesday. Palantir, a standout performer in 2024, has dropped about 30% in the past five days. Tesla shares also fell 8% on Tuesday, causing the company's market value to dip below the $1 trillion mark.
As per a survey conducted by Charles Schwab, two out of three traders believe the market is overvalued. Yet despite this, there remains a higher number of bullish traders compared to bearish ones – 51% vs 34%.
James Kostulias, head of trading services at Charles Schwab, stated, "It's clear that the majority of traders believe there's some froth in the market, but on balance they also feel like there's still more room for the bulls to run."
While there is a cloud of uncertainty hanging over the market, some strategists are hopeful that strong corporate earnings can drive stocks higher. Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, stated, "While we continue to expect volatility ahead as investors grapple with the potential impact of Trump’s proposed policies, we believe markets are likely to refocus on fundamentals that should support the equity rally further."
As investors grapple with uncertainties, government policies, and economic shifts, it remains to be seen how the market will fare in 2025.
Investors may see a shift towards investing in business sectors deemed safer, such as government bonds, as they try to mitigate risks associated with inflation concerns and economic uncertainty. By 2025, some business analysts predict that the S&P 500 could continue its bull run, fueled by strong corporate earnings, despite a downturn in tech stocks and lingering concerns about economic policies. Despite the global stock market thriving in certain regions, the VIX, a measure of market volatility, has surged dramatically in 2021, indicating a lack of confidence among investors.