S&P 500 Drops Amid Trade Jitters
On Tuesday, the S&P 500 closed 0.8% lower, settling at 5,572.07, after a volatile trading session, according to FactSet. A correction would occur if the index falls 10% from its recent peak, which would bring it to 5,529.74, based on Dow Jones Market Data.
Morgan Stanley’s Andrew Slimmon, senior portfolio manager for U.S. equities, stated, “I don’t believe the administration’s aim is to push the economy into a recession,” regarding President Donald Trump’s tariffs.
The U.S. stock market is facing a downturn, fueled by negative sentiment surrounding Trump’s tariffs. The S&P 500 is struggling to recover from a significant drop, nearing correction territory.
Slimmon expressed in a phone interview that market participants are focusing on the “darker side of tariffs.” He remained unconvinced that these tariffs would cause major inflation or severely harm the economy.
As tariffs—both imposed and threatened by the White House—continue to loom, market volatility has been increasing. Investors are concerned that the tariffs could escalate trade wars, hurting the economy and driving inflation.
President Trump announced on Tuesday that a new 25% tariff would be imposed on all steel and aluminum imports from Canada, raising the total tariff to 50%. This move was linked to Ontario’s proposed 25% tariff on electricity exports to the U.S., effective Wednesday. However, following a retreat from Ontario Premier Doug Ford on the electricity surcharge, the U.S. administration backtracked and decided to maintain the original 25% tariff on metals.
As the market processes this shifting news, Slimmon acknowledged that there’s substantial uncertainty. However, he asserted, “I don’t think the administration is trying to drive the economy into recession.”
Meanwhile, the market is bracing for reciprocal tariffs that President Trump plans to implement on April 2. Slimmon noted that U.S. stocks may struggle to rally significantly ahead of that date, as investor sentiment has turned increasingly negative over tariff concerns.
Despite the broader selloff, Slimmon sees potential buying opportunities. He emphasized that when the market reacts negatively to Washington, investors should focus on fundamentals. He expects the market to be higher by the end of the year, though he wouldn’t be surprised by a single-digit return.
After strong years in 2023 and 2024, U.S. stocks are stumbling in 2025, with the S&P 500 down 5.3% as of Tuesday.
Tom Essaye, founder of Sevens Report, commented that the market is now in a “fair value” range and could see some buying interest if fears of a policy-induced growth slowdown don’t materialize.
The Cboe Volatility Index (VIX), a gauge of investor anxiety, has jumped nearly 55% this year, reaching almost 27 on Tuesday.
Slimmon pointed out that speculative stocks have been especially hard-hit in the downturn, with momentum stocks taking a heavy beating. However, he sees potential in well-established Wall Street banks and certain Big Tech companies, particularly semiconductor stocks, which are more appealing than a few weeks ago.
While many Big Tech stocks have struggled this year, including Nvidia Corp., down 19%, and the iShares Semiconductor ETF, down nearly 11%, Slimmon believes they may present good opportunities moving forward.
Despite concerns over slowing growth, market participants are pricing in potential interest rate cuts by the Federal Reserve by year’s end. However, Slimmon does not expect a U.S. recession this year and sees the Fed as a potential counterbalance to investor concerns about fiscal policies.
Still, Monday’s sharp selloff, with the S&P 500 dropping 2.7%, has unsettled investors. Nicholas Colas of DataTrek Research remarked that the drop isn’t a clear sell signal but suggests caution amid market volatility.
