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US stocks fell sharply on Monday, as investor concerns grew over the impact of President Trump’s policies on the American economy.
The S&P stock index was down 1.3 per cent, after the index slumped 3.1 per cent last week in its worst weekly performance in six months.
The Nasdaq Composite, which has been hit by a sell-off in big tech stocks in recent weeks, was down 2 per cent, a fall of more than 6 per cent for Tesla. The carmaker’s shares surged following Trump’s election victory in November but have now given up all of those gains, losing nearly 50 per cent of their value since December.
The latest falls, which also dragged down markets in Europe and Asia, came after Trump on Sunday declined to rule out either a recession or a pick-up in inflation as he dismissed business concerns over lack of clarity on his tariff plans.
“Global growth and trade are under threat,” said Paul Donovan, chief economist at UBS Global Wealth Management, adding that Trump’s policy on tariffs has been “unpredictable”.
“If fear increases, consumers are less inclined to spend and companies are less inclined to invest,” he said.
In Europe, where shares have outperformed the US this year, the Stoxx Europe 600 index was down 0.9 per cent, dragged down by banks and technology shares.
Germany’s Dax, which hit a string of record highs last week after the country agreed a historic spending package, fell 1.2 per cent.
US Treasuries rallied on Monday, as investors sought haven assets. The 10-year yield, which falls as prices rise, was down 0.07 percentage points at 4.24 per cent.
Investors are concerned that Trump’s on-off trade war is hurting the US economy, with Friday’s disappointing jobs numbers the latest in a run of weak data.
Over the weekend Treasury secretary Scott Bessent provided little in the way of reassurance to worried investors as he acknowledged signs of US economic weakness. “Could we be seeing that this economy that we inherited starting to roll a bit? Sure,” he told CNBC.
Andrew Pease, chief investment strategist at Russell Investments, said the commentary over the weekend had added to investors’ nerves.
“Sentiment isn’t yet particularly oversold, so there is still room for investors to get more pessimistic,” he added.
Trump and Bessent seem to be prepared for “some pain to reorientate the economy”, said Deutsche Bank’s Jim Reid. “Taken at face value, these quotes suggests that their pain level is higher than most would’ve believed a few weeks ago.”
Meanwhile, Chinese consumer prices fell in February for the first time in 13 months, in the latest sign of weakness for the world’s second-largest economy. The CSI 300 index closed down 0.4 per cent, while the Hang Seng index dropped 1.9 per cent, although it is still up around 19 per cent this year.
The equity market falls of recent weeks mark a sharp reversal from the mood late last year and earlier this year, when hopes of deregulation and tax cuts under Trump fuelled a market rally.
Instead, duties on goods from trading partners such as Canada, Mexico, China and the EU have led investors to rein in their bets and driven many into cutting risk.
Wall Street banks are also rethinking previous bullish bets on how well the S&P will perform this year.
JPMorgan believes the index could fall as low as 5,200 — a near-10 per cent drop from current levels — due to “trade uncertainty”, while analysts at Citi believe the fallout from Trump policies can push the S&P down to 5,500 points. In December an average of 10 global banks expected the index to climb roughly 10 per cent in 2025 to about 6,550 points.
“The US exceptionalism trade has been experiencing turbulence over the last weeks,” said Dubravko Lakos-Bujas, a strategist at JPMorgan, adding that policy uncertainty has risen sharply at a time of a “budding growth scare” and “crowded investor positioning”.
Additional reporting by Ian Smith
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