The stock market’s shine in the wake of President Trump’s election wore off in late February, with the new administration’s early economic policy priorities and weak consumer sentiment making investors uneasy.
Stocks climbed to new highs in the immediate aftermath of Mr. Trump’s win, as traders geared up for lighter regulation and tax cuts — anticipating they would add up to accelerating growth. But that rally stalled in recent weeks as anxiety about the inflationary impact of new tariffs began to grow. A slump in technology stocks this week also weighed on the broad market.
By midday Friday, the S&P 500 — which touched a record as recently as Feb. 19 — was on track for its worst week of the year with a decline of about 2 percent. The index is down about 2.5 percent for the month, but it is still up slightly for the year.
The pullback began, in part, from renewed concerns about the inflationary effects of sweeping tariffs, which Mr. Trump has already imposed on China and has said he will broaden to Canada and Mexico next week. As recently as late 2024, investors had expected the Federal Reserve to cut interest rates several times this year, moves that would be positive for stocks and the economy, but that view has shifted quickly amid concerns that inflation will linger longer than expected. With rates set to remain elevated, worries have extended to the broader impact on the economy.
Recent economic surveys showing a sharp decline in consumer sentiment, in part because of pessimism about employment prospects, as well as expectations that prices could start to climb again, have fueled caution among investors too.
“The market had shown great enthusiasm around the election, and it was predicated on the likelihood of favorable taxation, of a lighter regulatory climate, and just general enthusiasm,” said Steve Sosnick, the chief strategist at Interactive Brokers. “The problem is, those expectations got a bit ahead of the reality.”
Here’s what else to know about the recent retreat:
Concerns about the economic outlook have been evident in other markets too. The 10-year Treasury yield fell to 4.24 percent on Friday, its lowest level since December. Oil prices also fell on Friday, with Brent crude down more than 1 percent to just over $73 a barrel and trading close to its lowest levels since late 2024.
Excitement about prospects for artificial intelligence had fueled a rally in tech stocks over the past year, but investors’ expectations may have stretched too far. The chipmaker Nvidia released quarterly results on Wednesday that exceeded analysts’ expectations but still left investors wanting more. Nvidia’s stock dropped more than 9 percent this week, dragging down the tech-heavy Nasdaq.
The Nasdaq is about 3.8 percent lower for the month, in what would be its biggest monthly decline since last April.
Tesla was a standout in February, falling nearly 30 percent for the month after a 14 percent decline this week. This week’s losses were in part a reaction to a steep decline in Tesla’s European sales. More broadly, the company, led by Elon Musk, last month reported a sharp drop in profit for 2024. Mr. Musk’s role in the Trump administration is also giving investors pause about his priorities.
A slide in cryptocurrencies is also weighing on stocks. Bitcoin, which rose to a milestone $100,000 in December, has fallen more than 20 percent from its high last month and is trading closer to $80,000. The drop has come even though the Trump administration has ushered in a lighter regulatory approach on cryptocurrencies, and as Bitcoin has fallen so have shares of companies with exposure to it like Coinbase and MicroStrategy.
But despite major stocks weighing on overall indexes this week, some analysts remained bullish about the long-term outlook, noting that the S&P 500 remains near a record high — and the mood on Wall Street is far from set in stone. Investor sentiment could “change on a dime,” Mr. Sosnick said.
How long Mr. Trump’s economic policies will weigh on the stock market remains to be seen.
“It’s certainly possible that stocks experience some additional policy-driven downside risk in the near term,” said David Lefkowitz, head of equities for the Americas at UBS Global Wealth Management. “But ultimately, we don’t think the Trump administration will take measures that have long lasting negative impacts on economic growth or inflation.”