The U.S. stock market has lost approximately $5.28 trillion in value over the past three weeks.
On February 19, the market value of the S&P 500 peaked at $52.06 trillion, but by Thursday, it had dropped to $46.78 trillion. This rapid 10% decline from a record high has pushed the index into correction territory.
Numerous factors have influenced the market’s downturn.
Editor's Take | Market downside is limited, but last week's rally may not extend: @nikunjdalmia
Big questions for D-Street: Tariffs, FIIs returning, F&O expiry & year-end factors. What could bring a fresh cue to the market? Listen in! pic.twitter.com/mfeIkPwmFP
— ET NOW (@ETNOWlive) March 27, 2025
Growing concern about erratic policies from the new administration has led to what Barclays strategist Emmanuel Cau refers to as an “uncertainty tax” on growth expectations. This sentiment is reflected in weak consumer sentiment surveys and tepid economic outlooks.
Another significant factor contributing to the decline is the unwinding of the growth trade related to artificial intelligence (AI).
Stocks To Watch | đź“ŠReady, set, trade! Keep an eye on these stocks as they set the market abuzz #StockMarket pic.twitter.com/Srk8OQxGnO
— ET NOW (@ETNOWlive) March 27, 2025
Stocks in this sector had seen substantial gains prior to the correction, leading to concerns about overvaluation.
Since February 19, Nvidia is down 17%, and the Roundhill Magnificent Seven ETF has fallen 16%. Our interactions with clients indicate that the mood music is changing,” Cau noted, suggesting that while many consider recession talk premature, concerns about policy uncertainty are significantly impacting market sentiment. This correction comes amid broader economic concerns.
The S&P 500 fell 1% yesterday, but more than half of it's components were higher on the day.
— Ryan Detrick, CMT (@RyanDetrick) March 27, 2025
Downturn impacts investor sentiment
Headlines about tariffs and trade disputes with several of the United States’ major trading partners have also played a role in market volatility. Despite these declines, the S&P 500 remains valued at 24.1 times its trailing 12-month earnings, which is well above its long-term average. These developments underscore the fragility of the current market and the significant impact of policy and economic signals on investor confidence
Image Credits: Photo by Jamie Street on Unsplash
