S&P 500 ends Q1 with loss as Trump’s tariffs rattle investors
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The S&P 500 closed the first quarter of 2025 with a significant 4.6% decline, marking its worst quarterly performance since mid-2022. The market downturn, amounting to a $3 trillion reduction in market capitalization, abruptly ended a streak of five consecutive quarterly gains. Investor sentiment weakened notably under the pressure of anticipated tariff hikes from the U.S. administration, casting a shadow over both corporate profitability and consumer resilience.
At the heart of the downturn lies renewed trade tension. President Donald Trump’s proposed tariff framework, expected to be unveiled on April 2, has sparked concerns of a sweeping escalation in protectionist policy. The administration has floated the possibility of levies reaching as high as 200% on targeted goods, potentially aimed at multiple major trading partners. While the intent is to incentivize domestic production and reduce trade imbalances, markets remain wary of the broader economic consequences, including supply chain disruptions, elevated import costs, and weaker consumer sentiment.
The policy uncertainty has prompted investors to reassess risk exposure, particularly in sectors heavily reliant on global trade. With earnings season on the horizon, traders are preparing for downward revisions in corporate guidance and heightened market volatility. The S&P 500’s Q1 correction serves as a stark reminder of the market’s sensitivity to geopolitical policy shifts.
In contrast, European equities outperformed their U.S. counterparts by a wide margin. The Stoxx Europe 600 index rose 5.2% over the same period, buoyed by optimism around fiscal stimulus and a more stable trade outlook within the region. At one stage, the index was up by as much as 10%, underscoring the growing divergence in equity performance across the Atlantic.
Looking forward, all eyes are on the details of the upcoming tariff announcement. Market participants are particularly focused on whether the new measures will be broad-based or sector-specific, and whether certain regions or industries will be granted exemptions. The outcome will be critical in determining the trajectory of U.S. equities in the near term and may shape investor strategy well into the second quarter.
At the heart of the downturn lies renewed trade tension. President Donald Trump’s proposed tariff framework, expected to be unveiled on April 2, has sparked concerns of a sweeping escalation in protectionist policy. The administration has floated the possibility of levies reaching as high as 200% on targeted goods, potentially aimed at multiple major trading partners. While the intent is to incentivize domestic production and reduce trade imbalances, markets remain wary of the broader economic consequences, including supply chain disruptions, elevated import costs, and weaker consumer sentiment.
The policy uncertainty has prompted investors to reassess risk exposure, particularly in sectors heavily reliant on global trade. With earnings season on the horizon, traders are preparing for downward revisions in corporate guidance and heightened market volatility. The S&P 500’s Q1 correction serves as a stark reminder of the market’s sensitivity to geopolitical policy shifts.
In contrast, European equities outperformed their U.S. counterparts by a wide margin. The Stoxx Europe 600 index rose 5.2% over the same period, buoyed by optimism around fiscal stimulus and a more stable trade outlook within the region. At one stage, the index was up by as much as 10%, underscoring the growing divergence in equity performance across the Atlantic.
Looking forward, all eyes are on the details of the upcoming tariff announcement. Market participants are particularly focused on whether the new measures will be broad-based or sector-specific, and whether certain regions or industries will be granted exemptions. The outcome will be critical in determining the trajectory of U.S. equities in the near term and may shape investor strategy well into the second quarter.