Stocks haven’t fallen this much since 2020. Their recovery could look different this time.
The S&P 500 (^GSPC) just saw its worst week since COVID-19 brought the world economy to a halt in March 2020.
The benchmark index fell roughly 9% between March 31 and April 4 in a tariff-fueled sell-off. Similarly, as the pandemic spread throughout the United States, stocks lost 12.5% in five trading sessions in 2020. But market experts say stocks’ recovery will look different this time around.
While the S&P 500 returned to record highs just four months after the pandemic crash, experts don’t think investors should expect such a quick comeback in 2025.
“At this point, you’re beyond the swift rebound story,” Renaissance Macro head of economics Neil Dutta told Yahoo Finance. “This is a confidence shock, and so it’s going to take a little bit of time to get that back.”
The recent shock to markets has come from President Trump himself. With tariffs expected to hit their highest level in a century, consumers and businesses are feeling worse about the trajectory of the US economy. This has shaken investor confidence too, with multiple recent bids to rally off the market bottom failing in recent days.
The largest difference between this shock and the one that came with the pandemic is that the president has a potential “off” switch for the chaos this time. But, at this point, Trump has shown few signs of relenting.
“We need to see some evidence of some negotiation very, very quickly,” Fundstrat global head of technical strategy Mark Newton told Yahoo Finance on Tuesday when discussing what could stop the market’s free fall.
The recent market sell-off has been driven by fears that Trump’s tariffs could halt US economic growth. Some argue they could even bring a recession.
In prior periods, like the pandemic, when economic growth has slowed, the Federal Reserve has slashed interest rates. This time around, the Fed isn’t expected to immediately come to the rescue.
Tariffs are expected to slow growth but also boost inflation. With markets reeling last Friday amid a two-day 11% sell-off in the S&P 500, Fed Chair Jerome Powell said it was “too soon to say what the appropriate monetary policy response will be to these new policies.”
Markets have been moving on each incremental tariff headline as investors attempt to price in their impact. But for businesses, the process isn’t that easy. Deciding how to operate with 54% tariffs on exports from China, only for them to be turned into 104% tariffs a few days later, provides an additional cloud of uncertainty that could slow corporate investment.
