Only a few months ago, stocks traded at consistent record levels as Donald Trump’s presidential win fueled a bullish Wall Street high on the hopes of pro-business policies and lower taxes.
Flash forward to today: That euphoria has all but evaporated. Trump’s tariff war escalation has sparked fears of slow economic growth while, at the same time, inflation remains stubbornly elevated. Softer data has also spooked investors in recent weeks, marking the return of “bad news for the economy is bad news for stocks.”
DJI – Delayed Quote•USD
^DJI^GSPC ^IXIC
Here’s the damage:
On Tuesday, US markets eliminated all their post-election gains as stocks deepened their sell-off with fresh tariffs on Canada, Mexico, and China now officially in effect.
The S&P 500 (^GSPC) has erased about $3.3 trillion in market cap since its record closing high of 6,144.15 on Feb. 19. At that time, the benchmark index’s post-election gains had been hovering at just around 6%.
Since the start of 2025, the S&P 500 is down around 2%, while the Nasdaq Composite (^IXIC) is off nearly 6% and has flirted with correction territory in recent sessions. The blue-chip Dow (^DJI) is trading just barely in the green for the year.
Spooking Wall Street? U.S. President Donald Trump and French President Emmanuel Macron (not pictured) attend a press conference at the White House in Washington, D.C., U.S., February 24, 2025. REUTERS/Brian Snyder ·REUTERS / Reuters
“Many of the key trends in financial markets in the run-up to and immediate aftermath of the US election last November have stalled or partly reversed since President Trump took office last month,” Jonas Goltermann, deputy chief markets economist at Capital Economics, wrote in a note last week.
He added, “In other words, the ‘Trump trade’ narrative that dominated many markets in Q4 is floundering.”
US Treasury yields are now trading at levels not seen since late last year as investors worry Trump’s tariffs will hurt economic expansion and dampen the labor market, potentially prompting the Federal Reserve to lower the cost of borrowing even as risks of higher prices remain.
Read more: What Trump’s tariffs mean for the economy and your wallet
The 10-year yield (^TNX) has sunk over 63 basis points from its January high to trade at just around 4.15%. As Citi analyst Stuart Kaiser said on Monday, “Rates are lower for the ‘wrong’ reasons.”
The US dollar, meanwhile, has also retreated after initially surging to kick off the year. Since the inauguration, the US Dollar Index (DX-Y.NYB), which measures the dollar’s value relative to a basket of currencies (the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc), has fallen around 2%.
“In our view, that reflects two key factors, both of which we think will prove temporary,” Goltermann said. “First, the incoming economic data in the US have weakened over recent weeks, while the outlook elsewhere looks a little bit improved.”
On Monday, ISM Manufacturing prices paid came in at their highest since June 2022, while new orders fell into contraction, suggesting a “stagflationary” environment in which growth slows but price increases remain elevated. That data arrived on top of bleak survey results for the month of February, with declining consumer confidence and sentiment results weighing on markets.
“Policy uncertainty appears to be [impacting] business and consumer confidence, although it is far from certain that this will translate into actual economic weakness,” Goltermann added. “Since the pandemic, survey data have been a less reliable guide to the economy. Nonetheless, interest rate expectations have shifted.”
For the first time this year, traders now expect three rate cuts from the Federal Reserve to cap off 2025. According to the CME FedWatch Tool, markets see a 50/50 chance the Fed lowers rates at its May meeting compared to a 75% chance the central bank holds rates steady one week ago.
Beyond the broader markets, certain sectors initially expected to perform well under a Trump administration have also lagged since the election.
Immediately following Trump’s win, small caps surged, with the Russell 2000 (^RUT) outperforming the leading market indexes. But the rally was short-lived, and the index is now down about 8% since its Nov. 5 close.
Companies within the small-cap index, which include regional banks and smaller domestic players, were expected to benefit from anticipated policies from the Trump administration, such as lower taxes and deregulation. However, those policies have yet to materialize as tariffs remain the administration’s current priority.
Meanwhile, sectors like Energy (XLE) and Industrials (XLI) also jumped in the aftermath of Trump’s victory due to expectations of more M&A, a steeper yield curve, and less regulation. Both have fallen around 3%.
Financials (XLF) have been the lone exception, up about 7% since Nov. 5.
And bitcoin (BTC-USD), one of the biggest beneficiaries of the post-election rally, has perhaps lost the most momentum after first exceeding $100,000 a coin late last year. The largest cryptocurrency is now trading at around $85,000, down about 22% from an all-time high of just above $109,000 in mid-January.
In individual stock moves, Trump Media & Technology Group stock (DJT), which had surged as much as 25% after Trump clinched victory over former Vice President Kamala Harris, is now down about 50% from that time period. Heading into the election, strategists had categorized the stock as a bet on the election given its meme-like trading patterns.
DJT is the parent company of Trump’s social media platform, Truth Social, which he frequently uses to communicate with the public.
And Elon Musk’s Tesla (TSLA) has seen brutal trading action in recent weeks. The stock, set to close under its 200-day moving average for the first time since August 2024, is down over 30% since the start of the year.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at [email protected].
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