Trump's policies scare Wall Street! Economic concerns intensify, and U.S. stocks and other risk assets face a "bloodbath."
As economic concerns sweep Wall Street, investors are pulling out of risk assets, leading to a sharp decline in the U.S. stock market, with technology stocks experiencing their largest drop since 2022. The Nasdaq 100 index plummeted nearly 4%, cryptocurrency prices fell, and bond issuances were canceled. Trump's policies of raising tariffs and cutting spending have triggered market panic, with Delta Air Lines lowering its profit expectations, and analysts predict that panic sentiment will emerge in the market
According to Zhitong Finance APP, on Monday, as economic concerns swept across Wall Street, investors pulled out of almost all types of risk assets, exacerbating the decline in the U.S. stock market.
U.S. tech stocks experienced their largest drop since 2022, with the Nasdaq 100 index plummeting nearly 4%. Cryptocurrency prices fell. Corporate bond issuances were canceled. The fear index on Wall Street and key indicators measuring credit risk surged. U.S. Treasury bonds rose, and yields fell sharply as they played the role of a last resort.
In summary, there is growing concern that U.S. President Donald Trump’s tariff increases, spending cuts, and geopolitical turmoil will push the U.S. economy into stagnation.
Trump warns of "short-term pain," market sentiment reverses
Trump and his allies began warning that there may be some short-term pain as he seeks to rebalance global trade, which heightened concerns. Investors started to prepare for this.
Alon Rosin, head of equity derivatives at Oppenheimer, stated, “Today’s trading feels like an absolute death spiral.”
U.S. stock market winners turned into the biggest losers
Market trends indicate that in less than two months since Trump took office again, market sentiment has changed significantly, as Wall Street once welcomed Trump’s presidency. The market initially had optimistic expectations that Trump’s tax cuts and deregulation plans would stimulate an already steadily expanding economy, thus driving the market forward.
However, in recent weeks, as Trump raised tariffs and cut federal spending, the outlook has dimmed. After the U.S. stock market closed on Monday, Delta Air Lines (DAL.US) lowered its profit forecast, citing increased uncertainty that weakened consumer and business confidence.
Amy Wu Silverman, equity derivatives strategist at Royal Bank of Canada Capital Markets, stated, “I think there will be panic in the market for a while. We are not at that stage yet. But as concerns grow, there will be risk unwinding and more uncertainty triggered.”
Of course, Trump and his administration have begun signaling that there may be an adjustment period as he seeks to control the ever-expanding federal deficit and challenge the global economic order.
Trump’s comments over the weekend sparked various speculations on Wall Street, with some saying he misjudged market sentiment, while others believed he supported selling stocks to lower interest rates.
Michael Rosen, Chief Investment Officer at Angeles Investment Advisors, stated, “Trump has spent weeks breaking the international economic system, probably to repair it and replace it with something ‘better.’ Since it is unclear what ‘better’ is, investors can only face a broken global economic framework. Unless we see something that can replace it, investors can only remain cautious.” Safe-haven assets become "hot cakes"
In the face of this situation, traders have returned to traditional strategies, flocking to defensive safe havens.
U.S. two-year Treasury bonds led the way, causing their yields to drop by about 11 basis points.
In the corporate bond market, concerns over credit risk have intensified, leading Wall Street bankers to cancel about 10 transactions arranged for high-rated companies, with indices showing that investors are withdrawing from lower-rated bonds. Bitcoin has fallen to a four-month low.
Most of the stock sell-off has been concentrated in large tech stocks that have made significant contributions to the bull market. The tech-heavy Nasdaq 100 index fell 3.8%, further entering a correction. Tesla (TSLA.US), once seen as benefiting from CEO Elon Musk's close relationship with Trump, saw its stock price drop by more than 15%.
As concerns grow, investors are turning to stocks of energy, consumer staples, and utility companies, which are less likely to be affected by cuts in consumer spending and tend to perform well during economic slowdowns.
Steve Sosnick, chief strategist at Interactive Brokers, stated, "If you are a long-only stock investor, you still have to put your money somewhere. If investors believe the future looks grim, those places are often where investors seek refuge. Riding out the storm."