In the wake of President Trump’s “Liberation Day” tariffs announcement, the stock market faced significant turbulence, with the S&P 500 plummeting over 12% within a week—one of its worst performances since crises like the 2008 mortgage collapse and the COVID-19 pandemic. Following this, government bond yields rose, increasing the cost of borrowing for the U.S. Amid a global sell-off influenced by the tariff announcement, Trump temporarily eased some tariffs, leading to a dramatic 9.5% surge in the S&P 500—the best daily performance in nearly 17 years. As of 32 days post-announcement, the market showed signs of recovery, mostly returning to pre-announcement levels, although still about 6% lower than before Trump’s inauguration.
The recovery was attributed to a combination of Trump’s softened stance on trade and a shift in investor sentiment toward acceptance of ongoing tariffs. Retail investors, buoyed by a recent influx into exchange-traded funds (ETFs), played a substantial role in market gains, with self-directed buyers significantly outnumbering sellers. Notably, the trading environments had shifted from the pandemic’s “meme stocks” to a more opportunistic focus on “buying the dip.”
Despite this rebound, economic uncertainties loom large, with recent reports indicating weaker consumer spending and rising unemployment duration. Additionally, bearish investor sentiment remains high, with many fearing further declines in stock prices. The outlook remains uncertain, particularly with unresolved trade dynamics, especially concerning China, emphasizing the fragility of the recovery in this complex economic landscape.
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