Trump's Return Tanks Markets: 2025 Outlook?

March 10, 2025

WASHINGTON — Since Donald J. Trump’s second inauguration on January 20, 2025, the American stock market has been on a relentless downward spiral, with major indexes tumbling and key sectors buckling under pressure. The S&P 500 has slipped below its 200-day moving average, marking its worst six-month stretch in recent memory. The Nasdaq, heavily weighted toward technology stocks, has shed more than 10 percent from its peak, officially entering correction territory. The Dow Jones Industrial Average closed last week at 42,579.08, down 427.51 points—or nearly 1 percent—in a single day.

This turbulence, analysts say, is no mere coincidence. It coincides with the rollout of Trump’s ambitious and divisive economic agenda: sweeping tariffs, tax cuts, and deregulation. Investors, rattled by uncertainty over trade policies and rising interest rates, are pulling back from riskier assets, leaving Wall Street in a state of unease. As the calendar turns toward the rest of 2025, the question looms: Where is the U.S. stock market headed, and can it regain its footing?

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A Policy Cocktail Shaking Markets

At the heart of the market’s woes is Trump’s return to protectionism. His campaign promise of 10 to 20 percent tariffs on all imports—and up to 60 percent on goods from China—has sent shock waves through corporate boardrooms. While the administration has hinted at flexibility, such as a recent pause on tariffs targeting Mexico and Canada, the unpredictability of Trump’s dealmaking has kept investors on edge. “It’s classic Trump—big threats, vague follow-through,” said Sarah Klein, an economist at Goldman Sachs. The bank estimates that if fully implemented, these tariffs could boost U.S. inflation by 0.7 percent while shaving 0.4 percent off GDP.

The fallout is already visible. Manufacturing and tech giants, reliant on global supply chains, have taken a beating. Nvidia, a darling of the AI boom, has plunged 9 percent since January. Microsoft is down 7 percent, and Tesla, led by Trump ally Elon Musk, has cratered 28 percent amid fears of shrinking electric vehicle subsidies. The Inflation Reduction Act, a cornerstone of Biden-era clean energy policy, faces potential dismantlement, further clouding the outlook for renewable energy stocks.

Meanwhile, Trump’s pledge to slash corporate and personal taxes—a reprise of his 2017 tax overhaul—offers a mixed bag. Financial firms and energy companies could see a windfall, but the cost is steep: a ballooning federal deficit that’s pushing up Treasury yields. The 10-year Treasury note hit 4.67 percent last week, a level that squeezes stock valuations, particularly for high-growth tech firms. Add to that a consumer confidence index at its lowest since mid-2024 and a services sector PMI signaling contraction for the first time in two years, and the specter of stagflation—stagnant growth paired with rising prices—looms large.

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Wall Street’s Roller Coaster

The market’s reaction has been swift and severe. The VIX, Wall Street’s so-called fear gauge, spiked 11.1 percent to 17.82, reflecting heightened volatility. “Investors hate uncertainty, and Trump’s delivering it in spades,” said James Rickards, a currency expert and author. Technology stocks, once the market’s growth engine, are faltering as companies like Marvell Technology warn of slowing AI infrastructure spending. Small-cap stocks, sensitive to borrowing costs, are also reeling as rising rates bite.

Yet not all corners of the market are suffering equally. Some see opportunity in Trump’s deregulation push, which could juice investment in artificial intelligence and traditional energy. Bank stocks, buoyed by the prospect of lighter oversight and tax relief, have held up better than most. Still, the broader trend is unmistakable: a shift away from U.S. equities. European and Chinese markets, along with Mexico’s, have notched gains in what analysts are calling a “reverse Trump trade.”

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The Fed’s Tightrope

Complicating the picture is the Federal Reserve. With inflation ticking up—partly due to tariff talk—markets are pricing in a 60.9 percent chance of steady rates at the Fed’s March meeting, dropping to 49.3 percent by May, according to futures data. Should trade policies stoke price pressures further, the central bank might even consider rate hikes, a move that could deepen the stock market’s woes.

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What’s Next for 2025?

Looking ahead, the outlook for U.S. stocks splits into two phases. In the near term—through the first and second quarters—expect more turbulence. Tariffs and rising yields could keep the S&P 500 and Nasdaq under pressure, with the latter potentially testing its 200-day moving average. “We’re in for a bumpy ride,” said Lisa Chen, a portfolio manager at JPMorgan Chase. “Cash is king right now.”

But by midyear, a pivot could emerge. If Trump’s trade negotiations stabilize and tax cuts begin to flow through, a rebound might take shape, led by financials, energy, and blue-chip stocks resilient to higher rates. The Fed could also play a wildcard: a shift toward looser policy in late 2025 might turbocharge a recovery. Goldman Sachs projects U.S. economic growth at just over 3 percent for the year, though Trump’s unpredictability could drag that lower.

Risks abound. A full-blown trade war with China or Mexico could hammer American firms. Stagflation, if it takes hold, might send markets into a tailspin. For now, investors are advised to hunker down—favoring defensive plays like dividend-paying giants over speculative tech bets.

As Trump’s second term unfolds, Wall Street finds itself at a crossroads. The policies driving today’s sell-off could, in time, sow the seeds for tomorrow’s rally—or a deeper slump. Much hinges on execution: Will tariffs stick, or will they soften under pressure? Can the Fed steady the ship? For now, the only certainty is uncertainty, and the stock market’s fate hangs in the balance.

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Wishing Everyone a Successful Investment Journey! 🚀

⚠ Disclaimer & Important Notes

1️⃣ This article includes personal analysis and insights on certain stocks. However, all information presented is purely personal judgment and analysis and should be used for reference only. The final investment decision and responsibility lie solely with you.

2️⃣ This article is an original creation protected by intellectual property rights. Unauthorized use, reproduction, or commercial exploitation without the author's consent may lead to civil and criminal penalties.

3️⃣ I do not engage in or discuss technical investing based solely on chart analysis. Not only do I lack expertise in that area, but I also believe that for regular employees and small investors who cannot monitor stock charts in real-time, such a trading approach is impractical. Consistent, long-term investment can still yield substantial returns, often exceeding hundreds of percent—and that is the true essence of value investing.