Behind the $4T US Stock Market Wipe-out—Causes and Investment Alternatives
Is the Sell-off Over?
$4 Trillion Vanished – Trump 2.0’s newfound indifference to the stock market sent investors into a panic, wiping $4T off the S&P 500 in a brutal sell-off.
A Grim Outlook Ahead? – Rising tariffs and government deleveraging cast a shadow over the economy, despite still-resilient momentum in the short term.
Time to Diversify? – As markets start pricing in a recession, U.S. stocks are losing their allure—diversification might be just in time.
Behind the $4T Stock Market Wipe-out
Monday was a bloodbath—S&P 500 plunged 2.7%, wiping out a staggering $4 trillion from the market’s peak last month. Following was the Nasdaq tanking over 4% on Mar 10, and the Dow shedding 2.08%.
The culprit? Trump’s tariff turbulence.
Fresh off his return to the Oval Office, Trump hit Mexico and Canada with 25% tariffs and slapped an extra 10% on China, effective in March. Investors initially shrugged it off, hoping for last-minute renegotiations. But then, Trump threw another curveball—delaying tariffs on America’s neighbors while keeping China’s in place. The erratic policy swings spooked the markets, leaving investors wondering: Is this a negotiation tactic, or does Trump actually believe tariffs will “make America rich again”? We all know tariffs drive up inflation— the last thing Americans want after years of runaway prices. But Trump seems dead set on reshaping global trade with climbing tariffs, no matter the cost.
Adding fuel to the fire, Trump downplayed recession fears, telling Fox News over the weekend: “There is a period of transition because what we’re doing is very big... You can’t really watch the stock market.” In other words, forget the stock market, we’re playing the long game. Meanwhile, his advisers argue a spending and hiring ‘detox’ is necessary, even if inflation ticks up in the short term.
With rising tariffs, policy unpredictability, inflationary pressures, and a White House indifferent to market turmoil, investors are looking elsewhere. Chinese tech stocks are surging, European defence stocks are rallying, too. With the recent underperformance and the worries about US economy, banks like Citi and HSBC are downgrading US equities.
The sell-off might just be getting started. The recent plunge in U.S. stocks is no accident—it’s actually part of the Trump administration’s “calculated sacrifice.” By engineering economic panic, they aim to pressure the Fed into cutting rates as soon as possible.