Wall Street sell-off turns 'ugly' as US recession fears grow
independent.co.uk
independent.co.uk
I think this is a unique situation because the recent moves (in my opinion) are largely a result of everyone's uncertainty around America's policies.
In other words, the recent stock moves aren't because we're seeing a bunch of companies fail to miss quarterly targets. There are no major economic indicators flashing red.
If stocks can drop that fast in a couple weeks, they can also (hopefully) rise just as fast, especially if the catalyst was some poorly timed or thought out US policy decisions. (Although there's a non-zero chance that the president continues down this road and just ignores the stock market in the short-term, which I find terrifying, along with everyone else on wall street I presume)
High levels of corporate monopolization, high levels of stock buybacks, and low to no wage growth. They've been flashing for so long people don't even recognize them anymore.
None of the wage growth has kept up with inflation, for any quartile of workers.
Wages are still down 0.5 to 1.5 % from pre-Covid times adjusted for inflation.
Do you have a source for your claim that they aren't?
Pumping that much free energy into the economy cannot be undone with the simple wave of the austerity wand.
Yes, there was a small amount of money pumped into the consumer economy ($2000/household). Yes, there were some supply shocks during the height of the lockdowns.
No, those do not explain the persistent high prices.
Unprecedented consolidation across all sectors made it easy for a much smaller group of people at the top to respond to a zeitgeist that expected inflation by keeping prices high after the supply shocks were over, and pocketing the difference. It didn't even require active collusion (though it wouldn't surprise me if there was at least a little).
Covid caused us to print $13 - $16 trillion dollars.
That's more money than every war the US has ever participated in combined.
Huh? There was "low to no wage growth" in the 80's and 90's. We do have wage growth now.
https://fred.stlouisfed.org/series/LES1252881600Q
Wage growth for over 25 no-college earners has been even better.
> high levels of stock buybacks
There's nothing economically dire, or even weird, about choosing buybacks over dividends in returning profits to shareholders. It just lets shareholders choose when to sell instead of doing it for them.
Or is it primarily concentrated in the upper quintiles?
(I actually genuinely do not know the answer to this offhand.)
https://www.ibtimes.com/infographic-real-wages-production-no...
Which is "real average hourly earnings for production and nonsupervisory employees," and is the source of the graph that purports to show stagnation between 1973 and 2017 (it has in fact grown higher than 1973 since then).
Why that particular graph? Well, it excludes wages for "the bosses" and such, so perhaps it shows something more like the average person's experience. But also, I think it's cherry-picked because it shows a particularly grim view. For example, here's the real median household income chart instead:
https://fred.stlouisfed.org/series/MEHOINUSA672N
And you see that it's by no means stagnant.
If you want, you can find income by quintiles. In like the 90's and 2000's, the rise of inequality, top quintile earnings growth was much higher than bottom four. But that largely stopped in the 2010's and has actually reversed in the 2020's, with bottom quintile growth now the strongest.
Long story short: income is complicated, there are a lot of ways to dice everything. But if you look into the claim that "wages have stagnated," you will overwhelmingly see the "real average hourly earnings for production and nonsupervisory employees" data line. And regardless of how good or bad that particular choice of data is, it doesn't actually show stagnation -- it shows a big drop in the 70s and 80s, largely stagnant 90s, and then growth since then.
Yes
But the Elephant on the sofa is a deranged President threatening important trade partners
Duh!
When he failed to "repeal and replace" the Affordable Care Act on "day 1", he goes on the stage a month later and says "Nobody knew that healthcare could be so complicated" [1]. I found this immensely funny, because pretty much every human other than Donald Trump knew that healthcare policy was really complicated, and many people tried telling him this.
I'm hoping he goes on stage soon enough and says "no one knew how volatile tariffs could make the economy" or something. Though "volatile" might be too big of a word for him.
[1] https://thehill.com/policy/healthcare/321318-trump-nobody-kn...
If he does change course, he's unlikely to call it a mistake. Politicians rarely admit mistakes.
A big factor of stock performance is the r market’s assessment of risk and its risk tolerance.
Both of those can change, and have nothing to do with company performance.
Also, companies don't exist in a vacuum. Every US company is impacted by the actions of the federal government. Some companies may be able to come out ahead, but many others will struggle. And predicting which is which is incredibly difficult.
It's why I've always been wary of this forced participation in the securities markets the US seems to have. It's forcing folks to gamble at a casino for the chance to retire or grow their earnings, using historical models to support arguments in lieu of actual regulations or guarantees of returns (like dividends, bonds, or interest rates on savings).
There's probably a broader participation in the market (re: few people) than most of history, both direct and indirect. That can be good and bad.
There's definitely a speculative component but it's nothing like a casino.
Maybe you get dividends, but you’d get more value from the comped room and buffet at the casino.
I hate that argument, because it's the equivalent of my saying I won a board game by preventing too many people from playing it with me, starting with most of the resources already in my possession, and changed the rules so it's harder to spend those resources than to acquire new ones.
As of 2022, Vanguard owned two-thirds of US companies by outstanding shares. That's one institutional investor controlling much of the marketplace. Literally everyone else - other institutional investors, retail investors, governments, corporate employees, etc - is competing for the scraps. If we're talking people, the top 10% of Americans own 93% of US equities according to a 2024 study - again, everyone else is competing for scraps.
So while you are technically correct in that stocks represent ownership, your detractors are more "spiritually" (as in, the spirit of the argument) correct in that it's an irrelevant point when the vast majority of US Equities are held by a fraction of the population. The argument falls apart completely when you consider Capital Gains are treated more favorably by taxation than wages, which is intentional.
So to John Q Public? It's a casino. They have zero hope of actually investing or having a say in corporate outcomes.
I'm not sure why the capital gains argument matters here. If the business can return money to shareholders in a way that increases their capital then they'll prefer to do so (e.g. via stock buybacks) but that benefits the fractional owner the same way it benefits the large owner.
It's true that if you own 0.0001% of a business you have very little influence about how it is run in the day to day. But the value of your investment is still anchored to the value of the business in exactly the same way as the larger owners are.
There is no "should".
You have hundreds of millions of people predicting the future using different models and heuristics. The future is a moving Target which also depends on what people think about it.
Firstly, only a small percentage of people are directly invested. A larger group is tangentially invested (through retirement funds) but that isn't applicable in the short term.
Secondly, traders (as distinct from investors) make money on volatility. So there's always short-term movement going on.
For a long time now the market is largely driven by emotion not substance. Big news event, dock of some company drops 5%. By the end of the week it's out the news and back where it started.
So yeah, the market does what the market does. It'll trend upwards, because that's what its designed to do.
There are other, more concerning indicators in play, which are more important than the stock market. Employment (or the loss thereof) has a much more immediate impact. We cheer as tens of thousands are fired. Yay?
Businesses and investors love stability. They want legal protections and regulations to be predictable. If this downturn is a result of uncertainty about policy, it won't be as easy to turn things around. Particularly if the policies continue to shift every other day.
But that doesn't mean the most chaotic approach is the best one. Bill Clinton shrunk the federal workforce by 400k without crashing the economy.
I'm a huge free market fan but I note that there's a lot of nice things that come from government jobs, for example clean and safe streets, or well-planned highways, and many others.
Do you have evidence Musk and Trump are firing the people that keep streets clean and safe, and plan highways?
You may have the alternate opinion due to a few million being saved in chainsaw cuts by DOGE but the proposed tax cuts are orders of magnitude higher.
For instance, GDPNow from the Atlanta Fed looks quite bad at the moment: https://www.atlantafed.org/cqer/research/gdpnow
I also have been looking at deliquency rates on industrial equipment leases lately, and they seem to be trending sharply upward: https://www.fitchratings.com/structured-finance/abs/equipmen...
Major retailers are also managing expectations for the next quarters. It seems like they're bracing for soft aggregate demand.
https://www.thestreet.com/retail/walmart-ceo-sounds-alarm-on...
Car loan delinquencies at record level: https://www.axios.com/2025/03/07/car-loan-payment-delinquenc...
"the January surge in imports - especially for gold - caused the model to move negative. As the Atlanta Fed noted: "the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points".
Usually there would be an offsetting increase in inventories, but that is a lagging indicator. This is a short-term distortion and will balance out over the next month or so. I don't expect negative GDP in Q1." [1]
1: https://www.calculatedriskblog.com/2025/03/a-comment-on-gdpn...
We have threatened to militarily invade 3-4 countries in the last month and publicly betrayed Ukraine. We have instigated trade wars with 3, including our contiguous neighbors who have been remarkably stable friendly for a century. No country will depend on our technology if it can be removed on the whim of a single person who has demonstrated a willingness to abuse this power. Same for our defense industry. Same for military and economic alliances. Countries won't want to import our goods if the regulatory framework ensuring their quality and safety is dismantled.
I agree with you that today is more a move based on perception than a change in current fundamentals, but I also believe this the beginning of a re-rating of the US as a superpower and it has a very, very long way to run,
edit: I'm not going to vouch for the dead reply. But they jokingly say "if you need an f 35 you'll buy it" as though they missed the news this weekend https://eutoday.net/germany-concerned-over-f-35-kill-switch/. The economic impact of that program is projected to be close to $100B per year on its own beyond the value of airspace superiority. There are already signs of purchasers reconsidering.
One says it's tariffs, another says it's "uncertainty", a third worries about "recession", others say "inflation" or "stagflation".
But none of them show logically or quantitatively how tariffs or "uncertainty" or vague, unsubstantiated worries about recession reduce the present value of future cash flows.
Meanwhile, the new regime's playbook is clear for all to see:
Deep cuts of 50% of more to government employment, selective default on government obligations, convert formerly independent institutions to ideological organs, devaluation of the dollar, and picking winners and losers based on ideology and diktat instead of merit and market forces.
If this is the playbook, who would want to own a broad basket of US equities instead of the politically favored names?
Why can't analysts connect the dots?
> Deep cuts of 50% of more to government employment, selective default on government obligations, convert formerly independent institutions to ideological organs, devaluation of the dollar, and picking winners and losers based on ideology and diktat
All of these reduce the present value of future cash flows by reducing said future cash flows. Like a sibling poster said: If the government stops spending, the US economy is screwed. The US is a lot less "free market" than most realize. Much of the economy is propped up by various subsidies at the raw inputs level.
Also when you choose winners and losers by diktat, this inadvertendly reduces the present value of future cashflows for any company that doesn't get picked.
They don't reduce the value of future cash flows, but they reduce the certainly of future cash flows that are discounted to present value. Additionally it's widely demonstrated that people will accept lower returns for lower risk/volatility. That's why T-bill have the lowest return, then bonds, then equities.
Which obligations has the government defaulted on?
Stocks that day shot up. Now it is correction time both on going back to indicators instead of hype and correction based on newly elected administration actions instead of people hopes.
Note that being the global reserve currency is the same thing as having a colossal trade deficit, and that a colossal trade deficit is the same thing as a colossal surplus of goods and services. I wonder if Trump thinks it's bad just because of the word "deficit".
As long as you have at least a ten year time horizon - and you should if you are investing in the broad stock market - you should be fine.
From a completely selfish standpoint, the stock market being down is great - it’s time to buy.
I do feel sorry (not really) for anyone who invested in Tesla. Its brand value is shit globally and the fundamentals aren’t good.
Is there any indication this will change or that worse decisions won't come out next week?
1. Trump is planning to deflate the dollar (not the least of which being that this his Secretary of Treasury wrote a plan to do this); 2. Trump might be planning to re-negotiate the US debt, for what I believe is the first time in history.
Neither is the kind of thing that the markets enjoy seeing. After all, if the dollar is deflated by 50% (I'm inventing that number), all the money invested in Wall Street suddenly loses 50% of its value.
Also, I've read a few economists, and they seem to agree that the prosperity of the US is largely a bubble based on the (artificially) strong dollar, but that the same strong dollar is killing US exports. By these accounts, Trump's maneuvers are an attempt to pop that bubble, which might be good, but will destroy the prosperity bubble, which nobody really wants. Whether it's true or not, that hypothesis is a good reason to not invest in US economy.
And none of these three points can be fixed easily.
Not a bubble, can argue what artificially means but crashing the economy to get slightly more manufacturing is obviously bad short and long term
Also, buying US military equipment will definitely need to be reconsidered, if you look at how fast your position can switch. Tesla and Starlink, good luck getting any new orders outside of US.
This is not some temporary one off, this is party moving away from US products (good luck getting us back once we found a good replacement), and party the idea that US can turn on you with a single stupid election.
This damage will take a long time to recover from. We really consider this a friends betrayal.
The world has never been less confident in the US. Much of our world dominance was based on protection and inclusion in our economic dominance.
“Trust takes years to build, seconds to break, and forever to repair”
That's not how confidence scares work though. A panicked flee from the market doesn't end with somebody going "oh it'll be okay", it's a very different buyer trying to buy the dip.
My point is this will be different people, different money, and likely not as fast to return as it leadenly dropped out.
Like, that's the part that annoys me about him more than anything else, how he's convinced a lot of people that he's "good at business". He's not; if he had just dumped the money his father left him into basically any index fund between the 1970's until 2016, he would have made more money than he had in 2016.
Any idiot can basically match the S&P500, just buy VOO or SPY or something, so I don't consider you a "good" businessman if you don't beat the S&P.
So it doesn't surprise me that he is uninformed and doesn't know how to negotiate.
The Apprentice was the OG reality distortion field and it's crazy people have trouble seeing through it all.
EDIT: Just fact checking this, it's the latter, 6 entities went bankrupt. It looks like the trump organization has 500 entities, so 1.2% bankruptcy rate.
[1] https://en.wikipedia.org/wiki/Personal_and_business_legal_af...
How the fuck would that even work? Would he just tell all the Americans holding treasury bills that they're only going to get half of their money back? I think that would completely erode any confidence in the US economy, both domestically and internationally.
[1] https://www.nytimes.com/2016/05/07/us/politics/donald-trumps...
I would really hope that Trump doesn't start nuking the US.
Presumably the latter would be a wash. Then of the domestic holdings, a big chunk is state and city holdings. Institutional investors would be mad. Citizens with saving bonds and/or money tied up in t-bills thanks to reddit are a tiny fraction.
The US can try to renegotiate or not pay, but that's an overt signal to investors that the US is not reliable and will result in the 10-year Treasury bond rate soaring, probably permanently, which will decimate our country's credit and is an own goal that we probably wouldn't be able to come back from economically.
The 10 year rate is not a force of nature. It is set at auction by investors who believe US t-bonds are a safer resting place than those of the economies that were destroyed by the nukes.
It's a racist dog whistle.
In reality, most of the US debt is owned by Americans and American businesses.
Renegotiating the US debt would basically rob Americans of money.
Some investors actually spend money in addition to investing it.
If you earn a high return on your investments every year and then go out and spend the returns on things like a $100 million private jet and a $25 million helicopter instead of reinvesting them, you don't beat the S&P. Does that mean you are a "bad" businessman? To me, to determine if someone is a good businessman, you need to look at what they took out and spent along with what they ended up with.
Not every rich investor is someone like Charlie Munger, who weeks before his death at the age of 99 was upset that if he had worked harder, he "might have had multiple trillions instead of multiple billions". Some people make money to spend money.
Put simply, I do not see meaningful and consistent value in the US Economy for the next four to six years. I'm doing research on taking my longs into index funds or positions in other markets that have a diversified economy (and not mostly services/imports, like the USA) and will be steaming away from their dependence on the American market in the following years. If I invest into anything domestic, it'll likely be companies reshoring parts of the supply chain and retracting outsourcing.
* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
I'm not generally 100% equities, often 80/20, so things will be rebalancing on their own at least at least:
* https://canadiancouchpotato.com/model-portfolios/
* https://www.finiki.org/wiki/Asset_allocation_ETF
* https://www.moneysense.ca/save/investing/etfs/one-etf-portfo...
I have a few more decades until retirement, so buying low now would be nice.
Just to be clear, the point of the linked article is that you cannot know that now is the LOW and not the new high.
Anything accessible to any person without days/weeks of research or insider knowledge is already priced-in. All the people rationally "buying the dip" are doing so as the price dips.
Any time you buy, you are betting on a future price against everyone else making bets. Most of those other people, who can move markets, are spending their entire lives in R&D to eek out a slightly better bet.
You're a mark if you think you can price better than them -- and they are the ones presently setting the price.
And even if you did know ahead of time when the dip would occur, this article show it's still generally best to DCA instead of sitting in cash:
* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
For example, just last week, I realized I had a bunch of money sitting in my crypto exchange that I thought was in Bitcoin, so I traded it for Bitcoin. Now it's worth 80% as much.
If you buy a little every pay cheque automatically, without looking whether things are up or down, how much are you really "timing" versus simply investing? (Especially if you buy a globally diversified fund like VT.)
Interesting that Tesla surpassed Toyota in net income in 2023 already: 15B vs 14B.
https://www.voronoiapp.com/_next/image?url=https%3A%2F%2Fcdn...
It's only sexy stocks that people get excited by that go to the moon on a paper kite.
For example:
- Comcast (does the public hate them? yes. does the public send them ~$35B in revenue every damn quarter? also yes): PE 8.7 (https://valustox.com/CMCSA)
- JP Morgan, 5th largest bank in the world, biggest bank in the USA. Is banking risky? Yes. Is JP Morgan going to evaporate? Hell no. PE: 11.7.
- General Motors. Setting the world ablaze? No. Going anywhere in the next 20 years? Probably not. Look at their revenue trend. (https://valustox.com/GM) PE: 7.4.
- United Airlines. Yes, they break guitars. Yes, airlines have been a risky bet. But their PE ratio is 8.1. (https://valustox.com/UAL) When you buy cheap, risk is low.
If you see a company's products everywhere but you never hear about their stock, your bargain-stock spidey senses should kick in. When it's the inverse, I stay far away.
It's much more straightforward math then reading of political or vibes tea leaves.
Other countries do business in dollars. This makes the dollar valuable as a trade currency. This means large foreign governments like(and need) to hold large amounts of USD.
The confidence in the USD is dropping very quickly, especially in Europe and Asia. This means countries will move to do business in other currencies, as those currencies will be viewed as more stable(or whatever other reason).
European defense companies are killing it.
By which, we mean, +120% in the last 6 months (Rheinmetall A.G.). Not +20%, but +120%.
The adulterers maybe.
They're acting like a bunch of kids smashing up the toys so nobody else can play.
With higher rates the monthly price is higher too which is contributing to un-affordability. But if rates go down then monthly payment prices would go down, which would cause prices to go up.
If rates go down because there's a substantial recession home prices may go down but many people may be out of jobs or unwilling to sell.
The market is currently tight but on both supply and demand. No one with a 2% mortgage wants to move. No one wants to buy at 6% interest.
https://www.realtor.com/research/us-housing-supply-gap-2025/
> “Many people have been worried about elevated valuations among US equities for some time and looking for the catalyst for a market correction.
The writing has been on the wall for 6 months now, depend on what sectors you care about, the technocrats from both sides have juiced this dilapidated system to it's breaking point.
The wealthy make their money in the market, while the poor rely on wages whose dollar keeps decreasing in value. I get the 401k angle too. But for too long the wealthy have prospered through dividends while the plebs can't afford rent, let alone a house.
People today are worse off than before Covid even though the market is much higher.
Debt fueled growth (through quantitative easing and deficit spending) is not healthy and always has a bad ending.
Real economic growth is what was seen between 1950 and 1970 where purchasing power increased and most of the gains went to the middle class.
Yes
but current administration and policy is terrible for almost everyone. Globalization has in general benefited poor and rich countries very broadly while hurting a few workers in certain industries. Trying to reverse that is largely futile and will double down on the bad sides of protectionism while not doing much to "bring back" jobs that moved abroad or became more automated.