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The Trump administration initiated new tariff policies beginning in mid-February and stepped up those efforts with an announcement in early April of sweeping new tariffs affecting virtually all aspects of global trade.

In early March, the S&P 500 crossed into correction territory (a decline of 10% or more from its peak). After a modest recovery, stocks are again declining, with the technology-heavy NASDAQ Composite Index and the small-cap Russell 2000 crossing into bear market ��territory (a retreat of 20% from peak levels). The S&P 500 is on the precipice of a bear market, down 17.6% from its high on February 19. Since President Trump took office on January 20, the S&P 500 is down 15.6%.¹

On April 2, President Trump laid out plans to impose tariffs as high as 54% on Chinese imports and sizable tariffs for products shipped from Southeast Asian nations. The White House also imposed 20% tariffs on products from European Union countries, and a minimum of 10% now applies to most countries' exports to the U.S. China already announced retaliatory tariffs against U.S. products, which could trigger additional tariffs imposed by the U.S.

“Markets continue to adjust to retaliations and retaliations on retaliations,” says Rob Haworth, senior investment strategy director at ��KY���� Asset Management Group. “In addition, markets are dealing with an unclear timeline on implementing U.S. tariffs.” Haworth says businesses are having difficulty planning under the current circumstances. “Businesses need a clearer plan to make investments, and we’re not there yet.”

As of April 7, the S&P 500 is down 10.7% in just three days of trading following the April 2 tariff announcement.¹ “Investors are still trying to adapt to the initial news, particularly given that the tariffs laid out by the President were far greater than markets anticipated,” says Haworth.

The market’s downturn since mid-February stands in sharp contrast to the market’s general enthusiasm in the wake of Trump’s November 2024 election victory, with the S&P 500 gaining 2.5% on the day following the vote. Through April 7, 2025, equity markets as measured by the S&P 500 are down 12.46% since November 5, 2024, and 13.93% year-to-date.¹

A changing economic landscape

“This is a roller coaster market with a wall of worry that’s under construction,” says Terry Sandven, chief equity strategist for U.S.��Bank Asset Management Group. “U.S. equities are navigating the crosscurrents between headwinds such as tariffs and the risk of an economic slowdown vs. inflation, interest rates, and earnings, which are directionally consistent with higher equity prices,” says Sandven.

The economy finished 2024 with solid growth, but President Trump’s growing focus on pursuing sweeping tariff plans raises concerns about its future direction.²

On April 30, 2025, the initial first quarter Gross Domestic Product (GDP) growth estimates are due for release. The Atlanta Federal Reserve’s “GDP Now” estimate of real GDP growth based on available data shows first quarter GDP of -2.8% annualized. In contrast, industry estimates forecast first-quarter growth of 2.5%.³ “Recession odds appear to be increasing, but it’s not yet a given that we can expect one in 2025,” says Haworth.

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Federal Reserve’s response

The first quarter 2025 Gross Domestic Product report won’t be released until April 30, 2025. Until then, investors are weighing other economic signals. The�� Fed’s policymaking Federal Open Market Committee revised its 2025 economic projections. This includes an uptick in inflation expectations and the unemployment rate, as well as slightly lower economic growth expectations.⁴

Based on recent surveys from the University of Michigan and the Conference Board, consumer sentiment is dropping.⁵ Haworth says it’s unclear that this will result in constrained consumer spending, but the markets are watching it closely. “The market still anticipates at least two Fed interest rate cuts this year,” says Haworth, “but there’s still uncertainty about how the Fed will react to economic data.” The threat of rising inflation, brought on in part by new tariffs, is an increasing concern. “The hope is that any inflationary impact is temporary,” says Haworth.

“The American consumer really isn’t buying the idea of temporary inflation,” says Eric Freedman, chief investment officer for U.S.��Bank Asset Management Group. “They have a sense that inflation may come in north of 4%.” The equity market’s recent retreat may partly reflect rising cost fears. “There’s a concern that the core consumer may slow spending, which would create issues for corporations trying to maintain earnings growth,” says Freedman.

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Stock market under Trump

Early investor enthusiasm for Trump’s victory may in part reflect the fact that markets generally prospered from 2017 to 2021 during Trump’s first term. However, more than two months into Trump’s new term, markets are in solidly negative territory.¹ At this very early stage, the S&P 500’s performance at the start of Trump’s term contrasts with market performances during most other administrations.

If you have questions, talk with a wealth planning professional. The ��KY���� Wealth Management team is always here to help.

¹ ��KY���� Asset Management Group.

² U.S. Bureau of Economic Analysis.

³ Federal Reserve Bank of Atlanta, “GDP Now,” April 7, 2025.

⁴ Federal Reserve Board of Governors, “Summary of Economic Projections,” released March 19, 2025.

⁵ University of Michigan, Survey of Consumers, March 2025; The Conference Board, “U.S. Consumer Confidence tumbled again in March,” March 25, 2025.