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Wall Street stocks posted their worst quarter in almost three years on fears that Donald Trump’s tariffs will usher in a period of stagflation in the world’s biggest economy.
The S&P 500 dropped 4.6 per cent in the first three months of 2025, the worst performance since the third quarter of 2022, FactSet data shows. The blue-chip index rose 0.6 per cent on Monday.
The sharp pullback in the first quarter comes as Wall Street banks and investors fret that Trump’s levies on trading partners will slow economic growth, while also increasing prices. Sentiment among consumers and businesses has also cooled sharply, several recent surveys have shown.
Investors are bracing themselves for Trump’s “Liberation Day” event on Wednesday, in which the US president is expected to announce fresh tariffs, on top of existing levies on imports of goods such as steel and aluminium.
Sharon Bell, senior equities strategist at Goldman Sachs, said: “I don’t necessarily see the floor quite yet [in stock prices].”
Goldman at the weekend raised its forecast for the core personal expenditures price index — the Federal Reserve’s preferred inflation gauge — by 0.5 percentage points to 3.5 per cent, above the February reading of 2.8 per cent. The investment bank also said it now saw a 35 per cent chance of recession over the next year from 20 per cent previously.
The tariff threat “ups the risk premium that you put on equities”, said Bell, although she added that the US stock market had “other issues”, including a slowing pace of growth and public sector cuts.
Big Tech stocks, which have dominated markets in recent years, pulled back sharply in the first quarter, with the Nasdaq Composite sliding 10.4 per cent. The shares were hit both by rising worries over the economy and concerns that a boom in spending on artificial intelligence infrastructure could be overdone.
Nvidia, which makes high-end chips that are widely used by AI groups to train their models, fell by almost a fifth in the first quarter. Elon Musk’s electric automaker Tesla plummeted 36 per cent. Industry behemoths Apple and Microsoft shed about 10 per cent.
European and Asian stocks closed down sharply on Monday, accelerating a sell-off that began last week after Trump said the reciprocal trade duties he is expected to announce on April 2 would apply globally.
After recovering some ground later in the day, Europe’s broad-based Stoxx 600 index ended down 1.5 per cent, while the UK’s FTSE 100 lost 0.9 per cent. In Asia, Japan’s benchmark Topix dropped 3.6 per cent while Hong Kong’s Hang Seng retreated 1.3 per cent.
Consumer-facing companies and other economically sensitive stocks also fared badly, with International Airlines Group down 6.6 per cent and United Airlines dropping 1.4 per cent amid concerns over demand for flights.
Trump’s tariff threats have also had a big impact on the industrial commodities sector. London-listed Anglo American fell 4.8 per cent, while Glencore lost 4.2 per cent.
Gold climbed as high as $3,128 a troy ounce, a fresh record, while US Treasury yields declined, in a sign that investors were switching into safer assets. The 10-year yield, which moves inversely to prices, fell 0.04 percentage points to 4.22 per cent.
“It is much more the uncertainty overall [that is] weighing on investor sentiment,” said Charles De Boissezon, global head of equity strategy at Société Générale. “The [tariff] announcements keep on changing, but what they have in common is that [they’re] just not good for growth globally.”
