Goodbye "Seven Sisters," "Recession Trades" Return to Wall Street

Wall Street is currently experiencing a new panic over economic growth. The trade protection policies suddenly implemented by the Trump administration have shattered investors' optimistic expectations for strong U.S. economic growth in 2025, triggering severe fluctuations in the financial markets, with major stock indices recently declining consecutively as investors begin to reposition for "recession trades."

According to Xinhua News Agency, U.S. President Trump stated on the 3rd that the proposed 25% tariffs on Mexico and Canada would take effect on the 4th. Trump also indicated that "reciprocal tariffs" would take effect on April 2.

Earlier this year, investors had high hopes for the Trump administration's push for tax cuts and deregulation policies. Some analysts pointed out that Trump's latest actions and signs of a slowing U.S. economy have forced investors to reassess his commitment to a broad protectionist agenda.

Since mid-February, the technology-heavy NASDAQ Composite Index has fallen by 7.5%, the S&P 500 Index has dropped about 5% from its record high set on February 19, and the Russell 2000 Index, which represents small companies, has declined by 9.4% since the end of January.

Bank stocks have become one of the hardest-hit sectors, while the consumer staples sector has performed relatively well, with Procter & Gamble rising 0.4% this week against the trend. Meanwhile, safe-haven assets like gold and U.S. Treasury bonds have rebounded.

According to Keith Lerner, co-chief investment officer at Truist Advisory Services, as quoted by The Wall Street Journal:

“Many people just assumed that tariffs were merely a bargaining tool, and now the uncertainty around this has increased.”

Brian Jacobsen, chief economist at Annex Wealth Management, stated that he still believes Trump will primarily use tariffs as a negotiating tool, but the president clearly intends to be tougher than previously expected, saying, “I thought negotiations would happen before implementation, but clearly he prefers to implement first and negotiate later.”

It is noteworthy that economic data has also begun to show signs of "weakness." The U.S. Consumer Confidence Index recorded its largest monthly decline since 2021 in February. A manufacturing survey released on Monday showed a significant drop in new orders and rising input costs. The closely watched GDPNow tracker released by the Atlanta Federal Reserve indicates an annualized economic growth rate of -2.8% for the first quarter.

Most economists believe that a significant increase in tariffs will slow economic activity, as businesses are forced to pay higher costs for imported goods and then pass those costs onto consumers. However, Goldman Sachs economists predicted in a recent report that tariffs would only reduce the U.S. economic growth rate by 0.2% this year, far less than the impact that other countries like Canada might suffer Risk Warning and Disclaimer

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