Global markets slid on Monday (7 April) in turmoil, in which the S&P 500 briefly participates in the territory of the Bear Market – defined as a decrease of 20% compared to the most recent peak – in the midst of escalating trade tensions faked by the renewed tarief push by President Donald Trump.
The S&P 500 index opened lower and dropped by 17.4% compared to its high on February 19, with only a decrease of 3.1% to officially mark a bear market.
Trump rejects the fall -out of the market, defends rates
Despite the steep losses in shares, Trump hit a challenging tone. He stated that he would not reverse the course about the radical rates, which he says he is the key to correcting what he regards as unfair commercial practices.
“Other countries have abused the United States with their trade policy,” Trump said, adding that the rates would yield “billions of dollars” in income.
When asked about market volatility and rising fears for a recession, the president noted: “Sometimes you have to take medicines to repair something.”
Fed is holding on for the time being
The chairman of the Federal Reserve Jerome Powell indicated that the central bank would continue carefully. On Friday, Powell stated that the FED must first “assess the economic effects of the rates” before the policy is adjusted. He also warned that lowering the interest rates could prematurely ‘inflation of the fan’.
Trump has renewed his calls for the FED to lower the rates, but the attitude of Powell does not suggest immediate relief for nervous investors.
Insight into bear markets and recession risks
Bear markets have preceded historically, but not always. Since 1929 there are 15 bear markets.
Recessions – defined as “a significant decrease in economic activity that spreads over the economy and lasts more than a few months” – usually have much more serious consequences. For example, the recession of 2020 induced by COVID-19 led to unprecedented levels of unemployment.
What lies for the markets?
With another wave of rates imposed by Trump that start later this week, the current market volatility could intensify. Investors keep a close eye on the movements of the Federal Reserve, the White House and the most important economic indicators to determine whether this decline of short duration is or the start of a deeper recession.
