U.S. stocks suffered a "Black Monday" bloodbath! Is it all Trump's "crow's mouth" to blame?

After experiencing a sharp decline last week, U.S. stocks faced a "Black Monday" this week.

The three major U.S. stock indices opened lower and continued to decline on Monday. At midday, the S&P 500 index had dropped more than 3%, the Nasdaq fell over 4%, and the Dow Jones Industrial Average was down nearly 1,190 points, a drop of nearly 2.8%. Ultimately, the Nasdaq closed down 4%, marking its largest daily decline since September 2022, while the S&P 500, which closed down 2.7%, also hit a new closing low since last September. The Dow fell nearly 2.1%, erasing gains since the U.S. elections in November last year.

The "Magnificent 7"—including Nvidia, Microsoft, Apple, and other tech giants—saw at least a 2% decline, with Tesla dropping over 15%, marking its largest decline since September 2020. The combined market value of the seven giants evaporated by over $830 billion on Monday, setting a record for the highest single-day market value loss.

Why did U.S. stocks suffer such a bloodbath on Monday? Many commentators pointed to Trump's "crow" remarks. According to CCTV News, on March 9, local time, U.S. President Trump downplayed the recent significant fluctuations in the stock market caused by his imposition and adjustment of tariffs during an interview, stating that one should not focus too much on the stock market. When asked whether the U.S. would face a recession this year, Trump did not rule out the possibility of a recession, saying:

"I hate to predict such things. We are in a transition period because what we are doing is very significant... We are bringing wealth back to America, which is a big deal, and there will always be a transition period that takes some time."

When asked whether his tariff policy would drive up inflation, Trump bluntly stated, "Tariffs may rise over time. They may go up; I don't know if that is predictable."

Some strategists believe that because Trump and his senior officials have failed to reassure investors about concerns over a recession in the U.S. economy, the market has "fallen into panic." Other comments suggest that there is increasing speculation that Trump is willing to endure economic and market difficulties to achieve long-term goals involving tariffs and reducing the size of government. Earlier, Wall Street Insights mentioned that among the top ten reasons for the "avalanche" in U.S. stocks summarized by Goldman Sachs' trading department, concerns about a recession ranked first.

Peter Cardillo, chief market economist at Spartan Capital Securities, commented, "The market itself says it all," adding, "I think what we are starting to see is not complete panic, but people are definitely starting to pull the trigger." Cardillo believes that the bond market seems to be flashing recession concerns, and the likelihood of the Nasdaq entering a bear market is "currently quite high."Former NYSE floor trader and founder of Sevens Report Research, Tom Essaye, believes that Trump's insistence on the current policy path and acknowledgment of the possibility of an economic slowdown have put pressure on market sentiment.

As of last Friday, the S&P 500 has spent 336 trading days above the 200-day moving average, and it now seems poised to break this streak of holding the key support level. Andrew Thrasher, a technical analyst and portfolio manager at Financial Enhancement Group, pointed out that if the S&P falls below the 200-day moving average, it would be concerning. A close below the 200-day moving average for two consecutive days would indicate a shift in the S&P's upward trend.

Data from Goldman Sachs' equity sales trading department shows that as of the week ending March 7, hedge fund selling has intensified, shorting at the fastest pace since November 2024, with long-term investors net selling $5 billion, and the long-short stock ratio dropping to its lowest level since 2019. The data also indicates that the sell-off is primarily concentrated in the technology, financial, and consumer discretionary sectors.

The main driver over the past few years has been the unexpected recovery of the U.S. economy, while recent trends mark a sudden shift in the market. Investors are increasingly uneasy about erratic tariff policies, high inflation, and uncertainty regarding the Federal Reserve's interest rate cuts.

Recently, bond market traders have been aggressively buying short-term U.S. Treasury bonds. Since mid-February, the yield on two-year U.S. Treasury bonds has significantly decreased due to expectations that the Federal Reserve will resume interest rate cuts as early as June this year to prevent economic deterioration. The signals they are sending indicate that Trump's chaotic tariff policies and federal government layoffs may further suppress economic growth, increasing the risk of a U.S. economic stagnation.

Gennadiy Goldberg, head of U.S. interest rate strategy at TD Securities, commented on the risk of recession:

"Just a few weeks ago, we were still being asked whether we thought the U.S. economy was re-accelerating — and now, suddenly, the term 'recession' is being mentioned repeatedly. The market has shifted from excitement about growth to absolute despair."

Tracy Chen, a portfolio manager at Brandywine Global Investment Management, stated, "Given that Trump's policy sequence is to impose tariffs first and then cut taxes, the risk of recession is certainly higher."

Chen also mentioned that before Trump initiated this tariff war, the market expected tariffs to drive up inflation, but now people believe that tariffs will lead to a recession, "so this is a huge shift."

Wall Street strategists are warning that volatility in U.S. stocks will increase. Due to Trump's tariffs raising concerns about economic growth slowing, market forecasters at institutions like JP Morgan and RBC Capital Markets have lowered their bullish expectations for 2025.

Chris Larkin, head of trading at Morgan Stanley E*Trade, stated, "There are always multiple forces at play in the market, but right now, almost all forces are taking a backseat to tariffs. Traders and investors should expect the market to continue to be volatile until trade policies become clearer."”