The U.S. stock market has seen a sharp decline since President Trump took office, marking the worst beginning to a presidential term in modern history. Since Inauguration Day, the S&P 500 has dropped 15% as of Sunday night, largely driven by Trump’s aggressive tariff policies.
This steep market fall is almost without precedent. Only former President George W. Bush faced a similar early-term decline in 2001, though under very different circumstances. Bush inherited an already weakening market caused by the bursting of the dot-com bubble. In contrast, Trump stepped into office with a strong market, one that had gained 23% in 2024.
A significant portion of the market drop came after Liberation Day, when Trump shook investor confidence by announcing a massive hike in tariffs. Ed Yardeni, president of Yardeni Research, called these repeated sharp drops “Annihilation Days,” comparing them to major crashes in financial history—like Black Monday in 1987, the 2008 financial crisis, and the COVID-19 crash of 2020.
Though the stock market doesn’t always move in sync with the broader economy, it still has a major impact. Today, more than 60% of Americans have investments tied to the market, compared to just 25% in the early 1970s.
David Kotok, co-founder of Cumberland Advisors, compared Trump’s tariffs to the 1973–1974 oil shock. He warned that this could trigger higher inflation, slower economic growth, or even a full recession.
Major financial institutions are also sounding alarms. JPMorgan now estimates a 60% chance of a recession, up from 40%. Goldman Sachs increased its prediction from 20% to 45%, and HSBC places the odds at 40%. The National Bureau of Economic Research will make the final call on whether the U.S. officially enters a recession, based on a variety of economic indicators.
Historically, a recession is defined as two straight quarters of falling real GDP. Current forecasts suggest the GDP could drop below zero in the first quarter of this year. If that happens, it would mark a major turning point.
Investor confidence is weakening, and a continued slide in the stock market could have ripple effects throughout the economy. If consumers reduce their spending in response, the road to recovery could become much tougher.
As the nation watches the market’s next moves, all eyes are on economic reports and government policy decisions. The growing fear of a recession highlights how closely linked Wall Street and Main Street have become.
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