In the first quarter of 2025, Wall Street faced its most challenging period in nearly three years, driven by anxiety regarding President Donald Trump’s tariff strategies. Investors are grappling with potential economic stagnation, known as stagflation, affecting the world’s largest economy.

Market Performance Overview

The S&P 500 index recorded a decrease of 4.6% during the first quarter, marking its worst performance since the latter part of 2022, according to data from FactSet. In contrast, the index saw a modest rebound of 0.6% on the latest Monday.

Investor Sentiment and Economic Projections

Concerns over Trump’s imminent tariffs have dampened investor sentiment, prompting worries about diminished economic growth alongside rising prices. Recent surveys indicate a notable decline in confidence among both consumers and businesses.

In light of these developments, Sharon Bell, a senior equities strategist at Goldman Sachs, remarked, “I don’t necessarily see the floor quite yet [in stock prices].”

Upcoming Tariff Announcements

Attention is focused on Trump’s upcoming “Liberation Day” event scheduled for Wednesday, where he is expected to announce additional tariffs, further exacerbating existing duties impacting imports like steel and aluminum.

Revised Economic Forecasts

Goldman Sachs revised its forecast for the core personal expenditures price index—an inflation indicator favored by the Federal Reserve—upward by 0.5 percentage points to 3.5%, exceeding February’s figure of 2.8%. They also projected a heightened 35% likelihood of recession within the next year, up from a previous estimate of 20%.

Bell elaborated on the situation, stating that the tariff threat “ups the risk premium that you put on equities,” while also noting that the broader U.S. stock market grapples with other challenges, including a slowing growth rate and potential public sector reductions.

Global Market Reactions

Markets in Europe and Asia experienced steep declines, following a sell-off triggered by Trump’s announcement of widespread reciprocal trade duties. The Stoxx 600 index in Europe ended down 1.5%, while the UK’s FTSE 100 fell by 0.9%. In Asia, Japan’s Topix index plummeted by 3.6%, and the Hang Seng in Hong Kong dropped by 1.3%.

Companies closely tied to consumer behavior and economic activity were adversely affected, with International Airlines Group witnessing a 6.6% decline and United Airlines dropping 1.4%, reflecting concerns over consumer demand.

Commodity Market Impact

Tariff announcements have significantly influenced the industrial commodities sector, contributing to a decline in notable stocks. London-listed Anglo American fell by 4.8%, while Glencore reported a 4.2% loss.

In contrast, gold prices surged to a record high of $3,128 per troy ounce, and US Treasury yields dropped, hinting at investor shifts towards safer assets. The 10-year yield fell by 0.04 percentage points to 4.22%.

Overall Investor Sentiment

Charles De Boissezon, global head of equity strategy at Société Générale, observed, “It is much more the uncertainty overall [that is] weighing on investor sentiment.” He emphasized the negative impact of the ongoing changes in tariff announcements on global growth prospects.