- The S&P 500’s (^GSPC) 10% drop from its $52.06 trillion peak on February 19 to $46.78 trillion on Thursday erased $5.28 trillion in market value over three weeks, driven by Trump’s trade war and signs of economic slowdown.
- The unwind of the AI growth trade has contributed significantly, with Nvidia (NVDA) down 17% and the Roundhill Magnificent Seven ETF (MAGS) down 19% since November 19, despite the index still trading at a high 24.1x trailing earnings.
- Investor sentiment is shifting due to policy uncertainty from the new administration, dubbed an “uncertainty tax” by Barclays’ Emmanuel Cau, amplifying concerns over growth amid weak consumer sentiment and retail outlooks.
The S&P 500’s (^GSPC) dramatic 10% plunge from its February 19 peak has erased $5.28 trillion in market value, according to FactSet, shrinking the index from $46.78 trillion on Thursday after peaking at $52.06 trillion, a staggering loss unfolding over just three weeks. This steep correction coincides with mounting economic headwinds, including President Donald Trump’s escalating trade war with key U.S. trading partners, where tariff-related headlines have jolted markets, compounded, as noted by CNBC, by signs of faltering growth evidenced by weak consumer sentiment and lackluster retail forecasts from giants like Walmart (WMT). Even with this decline, the S&P 500’s valuation remains elevated at 24.1 times its trailing 12-month earnings, per FactSet, far exceeding its historical average, reflecting lingering concerns over prior exuberance in the market.
A significant driver of this downturn has been the unraveling of the AI-fueled growth trade, with Nvidia (NVDA) dropping 17% and the Roundhill Magnificent Seven ETF (MAGS) falling 19% since November 19, signaling a retreat from the lofty valuations that saw individual stocks like these surpass $3 trillion in market cap earlier this year. Barclays (BCS) strategist Emmanuel Cau noted a shift in investor sentiment, highlighting to CNBC an “uncertainty tax” tied to erratic policy moves from the Trump administration, which has dampened growth expectations despite recession fears being deemed premature by many. This confluence of trade tensions, economic slowdown signals, and a reassessment of high-flying tech stocks has thrust the market into a volatile phase, underscoring the fragility of its prior record-setting run.
The broader context reveals a market grappling with both external pressures and internal recalibrations. The trade war’s ripple effects are amplifying uncertainty, as businesses and investors weigh the potential for prolonged disruption against a backdrop of softening economic indicators. Meanwhile, the retreat in AI-related stocks suggests a cooling of the speculative fervor that had propelled valuations to unsustainable heights, leaving the S&P 500 vulnerable to further shifts as it navigates this turbulent period. FactSet’s data captures the scale of the correction, with the $5.28 trillion wipeout serving as a stark reminder of how swiftly fortunes can reverse in an overextended market environment.
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