The stock market thrives on the ability of stocks to rise and fall. While Wall Street has historically been a source of wealth for over a century, it does remind investors occasionally that stock values can decline.
On February 19, the S&P 500 reached a record closing high of 6,144.15, with the Dow Jones Industrial Average and Nasdaq Composite also nearing their all-time highs set in December.
However, by March 13, all three indexes had experienced a swift decline. In just 16 trading sessions, the Dow dropped 8.6%, the S&P 500 fell 10.1%, and the Nasdaq tumbled 13.7%. The substantial declines for the S&P 500 and Nasdaq Composite officially marked their entry into correction territory.
While market corrections are a typical and healthy part of investing, the recent drop in the S&P 500 is more unusual than it might seem.
To understand the S&P 500’s decline, it’s essential to identify the factors that contributed to the downturn. A significant concern has been the uncertainty surrounding President Trump’s tariffs, which are taxes imposed on imports and exports, designed to protect American jobs and make local goods more competitive.
Despite the intended benefits of safeguarding American manufacturing, tariffs often lead to increased prices for U.S. products due to unclear applications of tariffs on finished goods versus manufacturing parts. The frequent changes in which goods are subjected to tariffs further frustrate investors who prefer clarity in policy.
