US stocks fell sharply over the past few weeks amid fears that Trump’s higher tariffs could spark a trade war around the world.
Markets are also concerned that the policies of President Trump could lead to a recession .
Investors are wondering when this bleeding will stop.
There’s good reason to think that, at the very least, the short-term sell-off has ended.
Fear gauge tells us what the stock market is doing
The CBOE Volatility Index, also known as “VIX”, has doubled since its low for the year and reached a new record high on Monday.
The index curve is also inverted, meaning that contracts nearer the future are priced more than those further away.
In addition, the unusual VIX inversion indicates that there are high levels of anxiety in the short term. This has historically been a sign for a bottom in trading on equities.
The benchmark S&P 500 has given up more than half the gains it had made over the last seven months. (Since early August 2024).
How to view US stock prices in the longer-term
Investors should be cautious, as the long-term outlook is still hazy.
The sell-off now reflects broader fears of an upcoming recession.
Trump tariffs may disrupt supply chains, increase business costs, and pass those on to the consumer this year. This could lead to a reduction in spending, a key driver for economic growth.
Other countries, such as Canada, Mexico and China, have announced their own retaliatory duties, which will also likely affect the demand for US products.
These factors could lead to a slowdown in economic activity, which may result in a further drop in S&P 500.
Are the United States in a recession already?
Peter Berezin is the chief global strategist of BCA Research. He says that this debate about recession may be a thing of the past.
Berezin began 2025 by setting a target for the S&P500 of 4,450 at year’s end. In his worst case scenario, the benchmark would have to return to the level of 4,200 this year because the US could be already in recession.
BCA predicts a greater likelihood of recession in the future under Trump’s administration, as “Trump will be disruptive to some extents and most of them are trade-related.”
Peter Berezin has never believed that Trump will use tariffs as a way to negotiate better terms of trade.
In a note he wrote recently, the US government needs to borrow money in order to reduce its budget deficit.
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