Wall Street’s optimism at the start of 2025, fueled by expectations of tax cuts and deregulation, has waned. Investors now fear that the previously strong U.S. economy may be faltering. Escalating trade tensions and indications of slowing growth have contributed to a decline in major indices in recent weeks. The market is experiencing a growth scare as economic indicators paint a concerning picture.

Yo-Yo Effect of tariffs

The market downturn accelerated following the imposition of 25% tariffs on key U.S. trading partners. This action has forced investors to reassess the potential for a broad protectionist agenda. The trade tensions are causing significant market volatility.

Sectors sensitive to economic slowdown, such as banks and smaller companies, have experienced particularly significant losses. The tech-heavy Nasdaq Composite has fallen 7.5% since mid-February. Oil prices have also declined, while safe-haven assets like gold and U.S. Treasury securities have increased in value.

Мисля, че много хора предположиха, че митата са просто блъф, а сега има повече несигурност около това, said Keith Lerner, one of the chief investment officers at Truist Advisory Services. This sentiment reflects the growing unease among investors regarding the impact of tariffs.

Despite the recent economic anxiety, many remain confident that this downturn will not be more severe than previous ones. Some believe the current threat is less alarming because it stems from government policies that could be reversed.The White House’s decision to grant automakers a one-month exemption from new tariffs on imports from Canada and Mexico led to a partial recovery of weekly losses on Wednesday.

Though, concerns have persisted as the inauguration, as the new governance has acted more aggressively than anticipated regarding tariffs and the dismissal of government officials.

The most concerning economic reports have largely been confined to “soft data,” such as confidence surveys.

Such as, the Conference Board’s Consumer Confidence Index experienced its largest monthly decline as 2021 in February. A survey of manufacturers indicated a sharp drop in new orders and a surge in production costs.

The survey cited several respondents expressing concerns about tariffs.Влизащите в сила мита водят до поскъпване на нашите продукти…Инфлационният натиск предизвиква безпокойство, one respondent stated. This highlights the direct impact of tariffs on business operations and consumer prices.

The GDPNow tracker, published by the Federal Reserve bank of Atlanta, currently projects a first-quarter growth rate of -2.8% on an annualized basis, although other models still indicate growth.

Most economists agree that a sharp increase in tariffs would slow economic activity, as businesses would be forced to pay more for imports and pass those costs on to consumers.

However, most economists did not expect higher tariffs to cause an economic contraction. In a recent report, goldman Sachs economists predicted that tariffs would reduce U.S. growth by only 0.2% this year, a much smaller impact than other countries like Canada might experience.

At Wednesday’s close, the S&P 500 was down about 5% from its recent record high on February 19, with a 1.9% decline for the week. The russell 2000 index of smaller companies was down 9.4% since the end of January.

Bank Stocks Decline Sharply

Bank stocks have been among the hardest hit. Goldman Sachs has lost 12% since reaching a record high on February 18. The consumer staples sector has generally outperformed, with Procter & Gamble, the maker of essential goods like Tide laundry detergent and Crest toothpaste, up 0.4% this week.

Concerns extend beyond Wall Street. thomas Cooper,a 34-year-old resident of Wooster,Ohio,who runs a service and advertising business and trades daily,said he bought more gold after Trump’s election to protect himself from volatility.

Пазарът просто се обръща срещу вас много бързо,от нищото,he said,highlighting the