S&P 500 enters bear market amid escalating tariff tensions
In early April, the S&P 500 entered bear market territory, defined by a 20% decline from its recent peak. The index fell to 4,870, down 21% from its high of 6,144 on February 19, 2025. This marks the second-fastest transition to a bear market in history, surpassed only by the rapid decline during the COVID-19 pandemic in March 2020.
The market's downturn is largely attributed to investor concerns over President Trump's tariff policies. On April 2, 2025, the President announced sweeping tariffs, including a 25% duty on imports from Canada and Mexico, and an increase in tariffs on Chinese goods from 10% to 20%. These measures have heightened fears of a global trade war, leading to significant market volatility.
The technology sector has been particularly affected, with major companies experiencing substantial stock price declines. For instance, Apple shares have approached a one-year low amid the tariff-induced market turmoil.
Global markets have also felt the impact. Hong Kong's Hang Seng Index experienced a historic 13.2% drop — its worst since 1997 — reflecting widespread concern over the escalating trade tensions.
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Get started todayIs now the right time to invest in stocks?
Given the current market volatility, investors, or would be investors, are questioning whether this is an opportune moment to buy stocks. Historically, market downturns have presented buying opportunities for long-term investors. According to Bespoke Investment Group, the average bear market since 1929 lasted approximately 286 days, while the average bull market persisted for about 1,011 days. This suggests that, despite short-term declines, markets have a tendency to recover and grow over longer periods.
However, it's essential to consider the specific factors influencing the current downturn. The implementation of tariffs has led to increased production costs for companies reliant on imported goods, potentially squeezing profit margins and leading to higher consumer prices. Economists warn that prolonged trade disputes could result in disrupted supply chains and slower global economic growth.
Financial leaders have expressed concerns about the economic impact of these tariffs. Larry Fink, CEO of BlackRock, suggested that the U.S. may already be in a recession and warned of a potential further 20% decline in stocks. Billionaire investor Bill Ackman described the tariffs as an "economic nuclear war," urging a 90-day pause to avoid global economic backlash.
Safer investment bets in a down market
For those considering entering the market during this downturn, experts recommend a more defensive investment strategy. Sectors traditionally seen as more resilient during economic uncertainty — such as utilities, healthcare and consumer staples — are considered relatively safer bets.
According to Morningstar analysts, healthcare stocks tend to remain stable because demand for medical services and products persists regardless of broader economic conditions. Companies like Johnson & Johnson and Pfizer have historically weathered economic downturns with less volatility.
Similarly, consumer staples companies — such as Procter & Gamble and Coca-Cola — offer goods that people continue to buy even in recessions, making them more attractive during periods of uncertainty.
Dividend-paying stocks with strong balance sheets are also appealing in bear markets. "Dividend payers may lag during market environments led by hot growth stocks, but in down periods like 2022 and 2018, they show resilience," Dan Lefkovitz, a strategist for Morningstar Indexes told ThinkAdvisor.
Additionally, investors might consider U.S. Treasury bonds or bond ETFs as a hedge against continued equity volatility. While bond yields remain modest, they offer a lower-risk option for preserving capital amid uncertain equity markets.
Ultimately, while the market presents risks, disciplined investing in resilient sectors and diversified holdings can help mitigate losses and position investors for eventual recovery.
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Looking back, President Trump's first term saw significant stock market gains, with the S&P 500 achieving an annualized return of 14.1%. However, the current market conditions differ, with increased volatility stemming from trade tensions and policy uncertainties.
Investors should also be mindful of the broader economic indicators. Goldman Sachs economists have raised the odds of a recession within the next 12 months from 15% to 20%, while JPMorgan Chase has increased the probability from 30% to 40%, citing extreme U.S. policies.
In light of these factors, investors are advised to exercise caution. Diversifying portfolios, focusing on fundamentally strong companies and maintaining a long-term investment perspective can help navigate the current market turbulence. Consulting with financial advisors to tailor strategies to individual risk tolerances and financial goals is also wise.
While market downturns can offer opportunities to acquire quality assets at reduced prices, the unique circumstances surrounding the present decline warrant careful consideration. Staying informed and vigilant will be key to making sound investment decisions in this evolving economic landscape.
Sources
1. Business Insider: The S&P 500 has tumbled into dreaded bear market territory (April 7, 2025)
2. Yahoo! Finance: Tariff storm ravages Magnificent Seven as Apple nears one-year low (April 7, 2025)
3. The Motley Fool: How Likely Is It That the Stock Market Crashes Under President Donald Trump in 2025? Here's What History Tells Us (January 12, 2025)
4. Business Insider: Here's what bright minds on Wall Street are saying about Trump's tariff-fueled market meltdown (April 7, 2025)
5. Market Watch: Bill Ackman warns of ‘economic nuclear winter,’ urges 90-day timeout on tariffs (April 6, 2025)
6. Think Advisor: 10 Dividend-Growth Stocks to Buy Now: Morningstar (August 9, 2023)
7. Al Jazeera: ‘Bloodbath’: US stock market sheds $1.75tn after Trump’s recession remarks (March 11, 2025)
8. Al Jazeera: ‘Why Trump’s tariff chaos sparked stock market meltdown and recession fears (March 11, 2025)
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