Even though we might think we’re living the best time of our lives, Wall Street doesn’t feel the same, as global tensions and the economic policy direction the United States is taking have triggered a historic market crash. We’re not talking about something like the famous 1929 Crash, but many experts have raised concerns about the situation.
What is happening?
Last Sunday night, the main U.S. stock exchanges began to plummet. What we commonly call Wall Street started the week with a sharp drop, leading many investors to sell stocks for fear that the country’s economy (and the global economy) could enter a serious economic crisis.
In the early minutes of the day, contracts linked to the S&P 500 dropped 5 percent, while Nasdaq-100 contracts fell by 5.4 percent.
But of course, this was not limited to the United States, as Asia also experienced historic losses. For example, Tokyo’s Nikkei dropped 6 percent, and Hong Kong’s Hang Seng ended up plummeting as much as 9 percent.
An economy marked by uncertainty
Since 2020, the markets haven’t seen a week as bad as the one they’re experiencing now. The S&P dropped 10 percent in just two days, and the Nasdaq and Russell are already considered to be in a bear market.
Experts have explained that the trigger was, without a doubt, due to the new tariffs imposed by the Trump Administration on several key allies, especially considering we’re already in a tense global climate. And of course, the lack of statements from the White House while the stock market was falling didn’t help calm investors.
Are we on the brink of a recession?
The panic in the markets is not just technical, and it’s understandable that people are a bit on edge, but the reality is this: an economic slowdown along with trade stagnation is possible. A recession is less likely, but we can’t rule it out at this point.
James Demmert, Chief Investment Officer of Main Street Research, spoke about the pressure stemming from the uncertainty about trade policies and the impact this could have on global growth, with a strong emphasis on the possibility of economic stagnation.
That same afternoon, Mark Arbeter, president of Arbeter Investments, confirmed that they wouldn’t beat around the bush and that after two days, stocks continued to fall.
A risky move
Julian Emanuel, head of strategy at Evercore ISI, stated that trying to reconfigure the global economic and political order built since World War II “in just 80 days” and using such an aggressive approach as the current tariffs is almost a guaranteed recipe for instability.
The impact of this trade policy is already being felt in investors’ wallets, and some economists fear it could also affect employment, industrial production, and consumption… throughout society in general, regardless of the country.
What role does Trump play here?
While the markets were collapsing, President Trump downplayed the event, spending the weekend at a golf tournament in Florida. Many analysts saw this non-response as a new tactic by the presidency to force new trade agreements.
What now?
Mainly, analysts expect volatility and a technical rebound to emerge, but there are still no clear signs that this will happen. Since the S&P began operating in five-day weeks in 1952, it has only seen 10 percent drops in two days during key moments of economic crisis (1987, 2008, and 2020).
Why is this important for the global economy?
Because what happens in the U.S. economy affects all countries. If there is a recession there, exports drop, investments shrink, and in many places, prices rise or the economy slows down. It can also affect the value of the dollar, gas prices, and tech product prices, among other things.
Stock market drop summary
- S&P 500 (futures): –5.3 %
- Nasdaq-100 (futures): –5.4 %
- Dow Jones (futures): –1,705 points (–4.3 %)
- Nikkei 225 (Japan): –6 %
- Hang Seng (Hong Kong): –9 %
- Bitcoin: –6 %, trading at $78,142
Article recap
- What happened? Wall Street started the week with a major crash, and analysts fear a global economic crisis.
- What does it mean that futures dropped? These are contracts that predict how stock prices will move when the market opens.
- Why did it happen? Because of the new trade tariffs being imposed in the United States for foreign trade.
- Does it only affect the U.S.? No, Nikkei, Hang Seng, and even cryptocurrencies also lost value.
- What do experts think? They fear a recession and global economic crises.
- What could happen now? There’s no clear solution or answer, just hoping diplomatic tensions don’t grow.