Stock Market Faces Brutal Start to March as Tariff Fears and Slower Growth Concerns Weigh on Investors

The stock market has entered a brutal phase in March, with both the benchmark S&P 500 and tech-heavy Nasdaq Composite experiencing significant losses. The reversal of post-election euphoria following President Trump's recent tariff war escalation and growing concerns over slower economic growth in the face of stubborn inflation have led to this downturn.

Market Volatility Reaches Unprecedented Levels

The S&P 500 has erased its post-election gains, with the Nasdaq Composite entering correction territory after falling 10% from its record closing high of 20,173.89 on December 16. February's jobs report, released last Friday, provided some relief with the US economy adding 151,000 jobs; however, it was still a brutal week for stocks.

The Dow Jones Industrial Average (^DJI) has also been affected, swinging 2% over the past seven consecutive sessions after hitting a record high on February 19. This volatility level is unprecedented, with data compiled by Yahoo Finance showing that this was the longest such stretch in intraday moves for the benchmark index since August 2024.

Wall Street Analysts Remain Bullish Despite Market Fears

Despite the market downturn, many Wall Street analysts remain bullish about the prospects of a recovery. Evercore ISI's Julian Emanuel has a year-end S&P 500 price target of 6,800, while Ed Yardeni from Yardeni Research expects the economy to "turn out to be remarkably resilient" due to increased consumer and capital spending.

Evercore ISI's Julian Emanuel believes that stocks suffer bear markets when complacency sets in. He stated in a note to clients on Tuesday that "the geopolitical headlines and the urgent selling of the past week in response to fears around tariffs, Ukraine/Russia and DOGE are the opposite of complacent and at odds with earnings that project 8.2% year-over-year growth with a Fed likely to cut twice to preserve the 'soft landing.'"

Tariffs and Economic Growth Concerns Continue to Weigh on Investors

The ongoing tariff war between the US and its trading partners has added uncertainty to the market, but analysts believe it won't end the tech bull market. Wedbush's Ives stated that "tariffs add uncertainty," but "it doesn't change the demand cycle." He believes that this is a scare, but more opportunities than a time to head for the hills.

The growth debate continues, with surveys and sentiment indicators contributing to investor panic. ISM's manufacturing prices paid came in at their highest since June 2022, while new orders fell into contraction, suggesting a "stagflationary" environment.

Federal Reserve Prepares to Step In

Following Friday's jobs report, markets continued to price in three rate cuts this year. The Federal Reserve has already indicated it would step in to stop the bleeding if the economy slows down further. This has led to a recalibration of future rate cuts, with many analysts believing that the Fed will take action to support the economy.

Conclusion

The stock market faces a brutal start to March as tariff fears and slower growth concerns weigh on investors. Despite this downturn, many Wall Street analysts remain bullish about the prospects of a recovery. The Federal Reserve is preparing to step in if the economy slows down further, which could lead to a recalibration of future rate cuts.

Recommendations

• Take advantage of lower valuations
• Buy opportunities are available in 2025's volatile environment
• Consider investing in companies with strong earnings and potential for growth

Disclaimer

This article is for informational purposes only and should not be considered as investment advice. Always consult a financial advisor before making any investment decisions.

Sources

• Yahoo Finance
• Associated Press
• Evercore ISI
• Yardeni Research