The U.S. stock market has lost about $5 trillion in value over the last three weeks. This rapid 10% drop from a record high has worried many investors. At its peak on February 19, the S&P 500 was worth $52.06 trillion, according to FactSet.
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By Thursday, the index’s value had fallen to $46.78 trillion, a total loss of around $5.28 trillion in just a few weeks. Several factors are driving this downturn, including economic uncertainty and changes in market dynamics. The administration’s ongoing trade talks and tariffs have created a volatile environment, increasing investor concerns.
From the @WSJ article, “The Week the Smart Money Got Whipsawed by the Market: Hedge funds usually like to take advantage of stock-market unrest. Lately, they have helped spread it instead.”#markets pic.twitter.com/SFYAtfBcVe
— Mohamed A. El-Erian (@elerianm) March 15, 2025
U.S. stock market decline engages analysts
Emmanuel Cau, a strategist at Barclays, noted in a client advisory that “the mood music is changing.” He said that while many see talk of a recession as too early, there are worries about unpredictable policy from the new administration, with the “uncertainty tax” hurting growth expectations. Another major factor seems to be the unwinding of the growth trade related to artificial intelligence (AI).
Since February 19, Nvidia has fallen by 17%, and the Roundhill Magnificent Seven ETF has dropped by 16%. These AI-related stocks had seen big growth before this correction, raising concerns that the market was overvalued.
Do you think this goes into a bear market?
Since 1950, I found 12 other times stocks corrected 10% from an all-time high and didn't go into a bear market.
6 and 12 month later? Never lower. pic.twitter.com/vAu3GsY8wI
— Ryan Detrick, CMT (@RyanDetrick) March 16, 2025
Even after the correction, according to FactSet, the S&P 500 is trading at 24.1 times its trailing 12-month earnings, which is well above its long-term average.
This market adjustment shows the delicate balance of investor sentiment and the broader economic outlook. Whether this is a temporary correction or the start of a longer downturn remains to be seen.
