On March 10, 2025, the U.S. stock market experienced "Black Monday," with all three major indexes collectively plummeting. The Nasdaq index crashed by 4%, marking the largest single-day drop since September 2022; the S&P 500 index fell by 2.7%, and the Dow Jones index dropped over 890 points, erasing all gains since last November's election. The market panic stemmed from a confluence of multiple factors: uncertainty surrounding Trump's tariff policies, rising expectations of economic recession, and the bursting of the technology stock valuation bubble, which together triggered this sell-off.
Policy and recession concerns act as a trigger.
The Trump administration has recently frequently mentioned increasing tariffs and emphasized reducing government spending to address the fiscal deficit. U.S. Treasury Secretary Basent stated that the economy may enter a "detox period," while Trump claimed that the "economy is in a transitional phase," with ambiguous statements intensifying market fears of recession. Institutions like Goldman Sachs have lowered their economic growth forecasts due to tariff impacts, with the Atlanta Fed predicting a 2.4% contraction in GDP for the first quarter, and BCA Research raising the probability of recession over the next three months to 75%. The VIX index, which measures panic sentiment, surged 19.21%, reaching its highest level since August 2024.
Technology stocks were severely hit, with Tesla's market value halving.
The technology sector was hit hardest, with Tesla plummeting 15.4% in a single day, losing over $800 billion in market value compared to its peak last December, and a decline of over 50% year-to-date; Apple, Nvidia, and Meta also saw declines exceeding 4%. Investors are concerned that the earnings of tech companies will be impacted by trade policies, while simultaneously shifting towards defensive assets. Dividend stocks and gold are in demand, with the S&P Dividend Aristocrats Index rising 3.5% this year, and traditional companies like Coca-Cola performing well against the trend.
Cryptocurrencies and Chinese concept stocks are under simultaneous pressure.
Bitcoin fell below $80,000, briefly touching a low of $77,400, as confidence in the "Trump trade" waned, and cryptocurrency funds saw a net outflow of $4.75 billion over four weeks. Although Chinese concept stocks collectively fell, the Nasdaq Golden Dragon Index's drop (3.59%) was less than the broader market, still outperforming U.S. stocks year-to-date.
The future of the market under policy competition.
White House economic advisor Hassett attempted to reassure the market, stating that the second quarter would "take off" due to tax cuts. However, investors remain doubtful about the Trump administration's tolerance for "reform at the expense of recession." Analysts generally believe that market volatility will continue, and the Federal Reserve may be forced to initiate interest rate cuts in June, but the effectiveness of the policy is uncertain.
This crash reveals the market's extreme sensitivity to policy uncertainty. Investors need to be cautious of the volatility in the "Trump trade" and carefully balance between defensive and growth stocks. Under the shadow of recession, the recovery of the U.S. stock market may depend on the interplay between policy direction and economic data.
Focus for the day: RARE RAD IOST QUICK
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