Global market volatility and geopolitical uncertainty have intensified amid President Donald Trump’s return to the White House, with economists warning that the US could be heading for a recession.
During an interview on Fox News’ “Sunday Morning Futures,” Trump declined to rule out a downturn, stating, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”
The market responded with a fresh sell-off on Monday, as concerns over trade policy and economic stability grew.
The Dow Jones Industrial Average fell by over 1,000 points, or 2.4%, while the S&P 500 dropped 2.8%.
The Nasdaq Composite suffered the worst hit, plunging 5% as major tech stocks saw heavy losses.
Magnificent Seven lead Monday’s market declines
The so-called “Magnificent Seven” stocks, which had been among the strongest performers of the bull market, led Monday’s sell-off.
Tesla tumbled 13%, marking its worst single-day performance since 2020.
Alphabet, Meta, and Nvidia each dropped around 5%, while Palantir, a favourite among retail traders, shed more than 10%.
The broader market is also showing signs of strain.
The S&P 500 is now down 9.1% from its February peak, while the Nasdaq Composite has slipped 14%.
Small-cap stocks, represented by the Russell 2000 index, have fallen 18% from recent highs—nearing bear market territory.
‘No recession in America’, Lutnick says
Despite market jitters, Commerce Secretary Howard Lutnick dismissed recession fears, asserting that Americans should “absolutely not” brace for an economic downturn.
Speaking on NBC’s “Meet the Press,” on Sunday, Lutnick emphasized Trump’s strategy of imposing reciprocal tariffs on foreign goods.
“There’s going to be no recession in America. … Global tariffs are going to come down because President Trump has said, ‘You want to charge us 100%? We’re going to charge you 100%,’” Lutnick said.
He insisted that Trump’s policies would “unleash America” and drive unprecedented economic growth.
However, market analysts remain skeptical.
“The talk of tariffs is, in a lot of ways, worse than the implementation of them,” said David Bahnsen, chief investment officer at the Bahnsen Group, adding that the tariff talk, reversal, speculation, and chaos only fosters uncertainty.
“I do not believe the administration knows how the tariff situation will play out, but if I were a betting man I would say that it will persist long enough to do damage to economic activity for at least a quarter or two, and ultimately result in a deal with different countries that make everyone wonder why we went through all the fuss,” he said in a note Monday.
Economists debate recession risks
Some economists believe the US economy may already be in a recession.
Last week, Peter Berezin, chief global strategist at BCA Research, placed the likelihood of a recession at 50%, stating that March could mark the official start of an economic contraction.
Berezin’s worst-case scenario projects the S&P 500 falling to 4,200, driven by a decline in corporate earnings and investor confidence.
“I think that driver will be a recession,” he said in an interview with MarketWatch.
Investment banks are also revising their outlooks.
Goldman Sachs increased its recession probability from 15% to 20%, citing the impact of tariffs, inflation, and weaker consumer spending.
Morgan Stanley cut its 2025 GDP growth forecast from 1.9% to 1.5%, noting that trade policies have been more aggressive than anticipated.
“While we expected growth-constraining policies like tariffs and immigration controls to come first, their severity has exceeded expectations,” Morgan Stanley economists wrote in a note to clients.
Economic data shows signs of weakness
Recent US economic data has raised additional concerns.
Consumer spending unexpectedly declined in January, while the trade deficit widened to a record $131 billion as companies rushed to move goods ahead of new tariffs.
Consumer confidence also fell sharply in February, marking its steepest drop in four years.
The Atlanta Federal Reserve’s GDPNow model currently estimates that the US economy could contract by 2.4% in the first quarter.
While this model is volatile, it underscores the mounting risks to economic growth.
Investors await inflation data for further clues
Markets are now looking ahead to key inflation reports due later this week.
Monthly consumer and producer price index data will offer insights into whether inflation remains stubbornly high.
Paul Donovan, chief economist at UBS Global Wealth Management, warned that uncertainty over Trump’s tariff policies is weighing on sentiment.
“Markets are now starting to get concerned about the prospects for growth in 2025,” he said.
“Trump’s tariff policy has been unpredictable, with a series of retreats so rapid they almost collide with the next tax hike announcement
“The rather chaotic US tariff policy still allows companies to sell a story to their customers to cover for price increases, and some may also try to raise prices in anticipation of tariffs that actually end up being retreated from.”
As investors digest the latest developments, all eyes will be on whether Trump’s economic policies can stimulate growth or push the US closer to a prolonged downturn.
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