CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.00% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US stocks tanked in the first quarter of 2025, with the Nasdaq 100 and S&P 500 both losing more than 10%. This was in response to the White House’s confirmation of sweeping tariffs on most of the world. The two benchmark indices continued to be shorted well into April. Were tariffs alone responsible for the volatility or are more factors at play? Read on to know what you watch going ahead.
Tanking stock markets in the US are undoubtedly a consequence of the second-time President’s aggressive tariff announcements. However, several other factors have also impacted investor sentiment.
Inflation in the US has been the stickiest among the major economies. As of April 2025, the US Federal Reserve (Fed) had only completed two rate cuts. Although the central bank was expected to exercise two more cuts in 2025, the Fed is on a “patient pause.” Moreover, the Fed has chosen to withdraw less money from the financial ecosystem, which effectively means no active measures to curb inflation. Rising inflation in the world’s largest economy has raised stagflation concerns. This means the economy may not grow, but inflation surges could lead to a recession. Investors tend to gravitate to safer investments, such as gold, in times of economic uncertainty, which weighs on the stock market’s performance.
During the one month up to March 13, 2025, the Magnificent 7 stocks declined much more than the broader market. Tesla shed the highest at 33%, Meta and Nvidia followed with a 16% decline each, and Alphabet, Amazon and Apple were close behind, registering losses of 15%, 15% and 14%, respectively. Microsoft remained the best performer, being the only one with a single-digit loss of 9%. The poor performance of the Mag 7 weighed on the tech-heavy Nasdaq 100, as well as the broad-based S&P 500. Such scenarios encourage selloffs in equities of the broader industry. The selloffs were partially triggered by the launch of DeepSeek, raising questions about the “true cost” and stock valuations.
The Federal Reserve of Atlanta, one of the closely followed organizations for GDP forecasting models, lowered the country’s Q1 growth forecast from 2.2% to -2.8% in the beginning of March. The GDP growth estimate for Q1 2025 was further lowered to -3.7% on April 1, 2025. The model uses data from the US Census Bureau and the Bureau of Labor Statistics to mathematically estimate GDP growth of the country. The reduction in the estimate was due to fears of tariff-triggered trade wars, which were expected to hurt corporate profits and weaken GDP growth. The possibility of economic contraction tends to push traders away from growth stocks to low-risk ones, such as healthcare and consumer staples.
Elon Musk’s Department of Government Efficiency (DOGE) is expected to exacerbate the unemployment issue by letting go of federal employees. It was among the primary sectors driving job growth in the country though 2024, taking the job growth into negative territory. Layoffs in the government may adversely affect the non-farm payroll (NFP) numbers, one of the most watched economic reports by investors worldwide. The NFP report is considered a leading indicator of economic expansion or contraction in the US and deeply impacts investor decisions.
Given President Trump’s crackdown on illegal immigrants, the US labour market faces a decline in both demand and supply of skilled workers. This may raise the vacancy rate as well as unemployment. While a tight labour market may support wage growth, insufficient manufacturing workforce may reduce productivity. Together, the combination is set to add fuel to the inflationary fire.
The spat between Ukraine’s President Volodymyr Zelensky and Donald Trump was a first in the history to be aired live. Contrary to what President Trump had claimed, his leadership failed to put an end to the Russia-Ukraine war. Instead, President Trump’s willingness to include Canada as the 51st state and even “own” the Gaza Strip have spurred new fears regarding geopolitical instability. Such instances are considered the biggest fear triggers for investors, driving them towards safer investment instruments.
Using derivative instruments, such as CFDs, is a popular technique to explore declining markets. Trading indices and forex via CFDs allows you to make the most of the opportunities arising in bearish and bullish markets. Here are a few tips to match to your trading psyche and refine your trading strategy with the current market mood:
A declining stock market does not mean traders sit on the sidelines and stop exploring opportunities. This is because 78% of market best days occur during bear runs or the first two months of a bear run. Although the US markets still have a long way to officially be in bearish mode, an over 20% decline in the stock markets will put it in bear territory. Staying prepared with the right education and trading strategies is key to navigating market uncertainties.
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