The stock market declined again, with data from CNBC showing that the Dow Jones Industrial Average fell by 381 points, or 0.9%, while S&P 500 futures dropped 1.1%. The Nasdaq faced the most significant blow, decreasing by 1.4%. The latest sell-off was triggered by new import tax rates on goods from Canada, Mexico, and China, unsettling the market. In response, China and Canada retaliated with tariffs, while Mexico warned of countermeasures to be implemented by the weekend.
Wall Street was hit hard by uncertainty. Stocks have already lost over 1% this week, as investors rapidly offload riskier assets. The White House announced on Wednesday a one-month delay for certain auto tariffs, but this was insufficient to calm fears. Traders had hoped for broader exemptions, but skepticism is growing.
Nasdaq Composite | Source: CNBC
The Russell 2000 index, which tracks small-cap stocks, has fallen 9.4% from its January peak. Goldman Sachs and other major banks have been affected, while Procter & Gamble has garnered more interest. Employment data also did not help the situation. According to ADP’s latest payroll report, private companies added only 77,000 jobs in February, far below the Dow Jones estimate of 148,000. This also marked a decline from the revised 186,000 in January, representing the weakest job growth since July. The trade, transportation, and utilities sectors lost 33,000 jobs in February. These figures have raised concerns about stagnation, a combination of rising prices and slowing growth that could jeopardize the economy. Wall Street is increasingly worried that Trump’s tariff policies might stifle economic growth.
Trump’s “America First” trade bets have backfired. When Trump rang the opening bell at the New York Stock Exchange in December, investors cheered his economic vision. The idea was simple: America would win the trade war while its competitors struggled. This bet has not paid off. U.S. stocks have struggled in Europe instead of crushing global competitors. The S&P 500 has increased 6% over six months, matching the UK’s FTSE 100. However, this lags far behind France’s CAC 40 (+9%) and Germany’s DAX (+20%). The Stoxx Europe 600 has risen 8%. Since November, a massive German stimulus package has pushed the euro to its highest level. A weaker dollar is pushing investors towards Europe, where stock valuations appear stronger.
Stock Heat Map | Source: TradingView
Alain Bokobza, Global Asset Allocation Head at Société Générale, stated, “We have transitioned from ‘all roads lead to the U.S.’ to many breakdowns of American exceptionalism.” Traders are moving money elsewhere. German defense stocks are thriving. Rheinmetall’s shares have surged by 130% in six months. Siemens’ energy sector has grown by 115% with increased infrastructure spending. Meanwhile, Tesla, one of the biggest stock market winners since Trump’s election, has nearly lost all its post-election gains. According to Goldman Sachs, fund managers now refer to this as the trade to “Make Europe Great Again,” with investors pouring money into European stocks at the fastest pace in three years. Amundi’s Chief Investment Officer Vincent Mortier remarked, “We are witnessing a massive MAGA.”
As investors reconsider technology bets, U.S. stocks are on the decline. Despite abundant earnings reports, U.S. stocks are struggling to keep pace. Economic data appears poor, and the tech sector, once at the core of Wall Street rallies, is starting to look less attractive. The market is questioning the AI boom and whether tech stocks can continue delivering the hefty profits investors expect. Currently, investors are not buying more but using tech stocks as a “source of funds,” selling major U.S. companies to purchase stocks in Europe and emerging markets. “Ironically, in a year where everyone claims America first, other markets, including emerging markets and Europe, may outperform,” stated David Hauner, BOFA’s Head of Emerging Markets and FX Strategy.
The bond market tells a similar story. Traders now expect at least two rate cuts this year, with a significant chance of three. Earlier this year, only one or two cuts were anticipated. At the same time, the yield on the 10-year Treasury has fallen from 4.8% in January to below 4.3%. In Europe, German Bund yields surged to 2.8%, the highest level since 2023. Investors are betting on growth in Europe, reversing a trend where all funds flowed into U.S. equities since the beginning of the decade.
Fund managers say Wall Street’s first-term assessment was flawed. Some fund managers believe the market misunderstood Trump’s impact from the start. Investors should focus on the long-term effects of tariffs and economic slowdown rather than on short-term tax cuts and deregulation. Trevor Greetham, Head of Multi-Asset at Royal London Asset Management, stated, “The good news about taxes and deregulation was quickly priced in. However, it is challenging to price in the bad news – health, evictions, and slowing growth – before it actually happens.”
Meanwhile, European investors are becoming increasingly optimistic. Policymakers are pushing for substantial stimulus measures, which could ultimately narrow the performance gap with the U.S. Karen Ward, Chief Market Strategist for EMEA at JPMorgan Asset Management, remarked, “Europe is in the best shape during a crisis.” She believes that investors underestimate Europe’s resilience. Ward added, “A penny in Europe has changed the world. If we do not galvanize and move together, we will encounter various problems.”
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