NEW YORK — U.S. stocks careened through a manic Monday after President Donald Trump threatened to crank his tariffs higher, despite a stunning display showing how dearly Wall Street wants him to do the opposite.
An electronic display shows financial information on the floor at the New York Stock Exchange on Monday in New York.
The S&P 500 slipped 0.2% at the end of a day full of heart-racing reversals as battered financial markets try to figure out what Trump’s ultimate goal is for his trade war. If it’s to get other countries to agree to trade deals, he could lower his tariffs and avoid a possible recession. But if it’s to remake the economy and stick with tariffs for the long haul, stock prices may need to fall further.
The Dow Jones Industrial Average fell 349 points, or 0.9%, and the Nasdaq composite edged up by 0.1%.
All three indexes started the day sharply lower, and the Dow plunged as many as 1,700 points following even worse losses elsewhere in the world. But it suddenly surged to a gain of nearly 900 points in the late morning. The S&P 500, meanwhile, went from a loss of 4.7% to a leap of 3.4%, which would have been its biggest jump in years.
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The sudden rise followed a false rumor that Trump was considering a 90-day pause on his tariffs, one that a White House account on X quickly labeled as “fake news.†That a rumor could move trillions of dollars’ worth of investments shows how much investors are hoping to see signs that Trump may let up on tariffs.
Stocks quickly turned back down, and shortly afterward, Trump dug in further and said he may raise tariffs more against China after the world’s second-largest economy retaliated last week with its own set of tariffs on U.S. products.
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It’s a slap in the face to Wall Street because it suggests Trump may not care how much pain he inflicts on the market. Many professional investors had long thought that a president who used to crow about records reached under his watch would pull back on policies if they sent the Dow reeling.
On Sunday, Trump told reporters aboard Air Force One that he wasn’t concerned about a sell-off and that “sometimes you have to take medicine to fix something.â€
Trump has given several reasons for his stiff tariffs, including to bring manufacturing jobs back to the United States, which is a process that could take years. Trump on Sunday said he wanted to bring down the numbers for how much more the United States imports from other countries versus how much it sends to them.
Indexes nevertheless did keep swinging between losses and gains Monday after Trump’s latest tariff threat, in part because hope still remains in markets that negotiations may still come.
“We’re not calling the all-clear at all, but when you have this type of volatility in the market, of course you’re going to have back and forth†in markets not just day to day but also hour to hour, said Nate Thooft, a senior portfolio manager at Manulife Investment Management.
“We’re all waiting for the next bit of information,†he said. “Literally a Truth Social tweet or an announcement of some sort about real negotiations could dramatically move this market. This is the world we live in right now.â€
4 strategies to navigate market volatility in 2025
Navigating market volatility in 2025
After reaching all-time highs in February, U.S. markets have experienced notable volatility amidst a flurry of news regarding tariffs and rapid changes in the geopolitical landscape. The S&P 500 is now negative for the year, having declined nearly 9% from its mid-February peak (as of March 31, 2025), while the tech-heavy Nasdaq briefly entered correction territory in early March, and is down over 9%. This pullback has effectively erased the post-election gains, explains, and investors have been seeking safe havens like bonds and gold.
Understanding Current Volatility Drivers
Market weakness has been driven primarily by high levels of uncertainty rather than any meaningful change to economic fundamentals. Investors dislike uncertainty in any form, and are experiencing it through multiple channels.
While investors get tariff headlines multiple times a day, they still don't know: Will all the proposed tariffs actually go into place? How long will they last? What might ultimate settlements look like? How will consumers respond? How will manufacturers respond, domestically and abroad?Ìý
The past several weeks have made it clear that proposals and threats can change at any moment. Unpredictable policy leads investors to reduce risk exposure and keep capital on the sidelines, at least temporarily until they have a better sense of the playing field.
Contextualizing Market Pullbacks
While there has been impressive performance in equity markets for two consecutive years, pullbacks are normal. On average, the S&P 500 has seen a correction, or decline of at least 10%, every year going back to 1928. Declines of 5% are even more common, occurring over three times per year on average over that period. In spite of these regular drawdowns, the S&P 500 has managed strong double-digit returns over the past 100 years. In many instances, pullbacks can be healthy for durable market returns, curbing.
Portfolio Diversification Demonstrating Value
This volatility has reinforced the benefits that diversification can offer across both asset classes and geographic regions. Thus far this year, while the S&P 500 is down over 4% as of March 31, 2025, the market has seen:
- International equity strength: European equities have delivered their best relative performance to start the year since 2000, with double-digit gains during the first two months of 2025. Emerging markets are also showing gains against U.S. market declines.
Ìý - Fixed income outperformance: Bonds are up over 2% for the year while U.S. equities have declined, demonstrating their essential role as portfolio stabilizers during market turbulence.
Foreign markets entered the year in a very different place than U.S. equities. International stock valuations were at historical levels of discount vs. U.S. stock valuations. Many international economies are also significantly earlier in their economic cycle (meaning they have seen recessions more recently) than the U.S., setting the framework for a longer potential period of future economic growth. At the same time, investors have been meaningfully underweight in international equities relative to historical levels. All of these factors are contributing to the outperformance of international stocks seen year-to-date.
Meanwhile, bonds are acting as a hedge against a potential economic slowdown in the U.S. Domestic consumers and businesses are grappling with monetary policy that has been restrictive for an extended period of time and significant uncertainty related to trade policy. As investors grow concerned about the potential impact to the economy, they bet that the Fed may have to ease and bring rates lower in the future than they are today. This causes bond prices to rise, offsetting weakness in the equity markets.
Medium-term, U.S. equity markets can be a great place to be invested. Some of the highest quality companies in the world are in the S&P 500—these businesses can grow earnings regardless of economic pressures. The Fed also has the capacity to stimulate the economy should growth and corporate earnings come under meaningful pressure.Ìý
However, other regions of the world can generate attractive returns, especially given relative valuations and greenshoots as it relates to international earnings. And diversification can help ensure balanced returns in periods of temporary weakness in a particular region or asset class.
Strategic Actions for Investors
During periods of elevated volatility, here's what disciplined investors can do:
1. Strategic Tax-Loss Harvesting
Market declines create valuable opportunities. Identifying positions with unrealized losses while maintaining market exposure through temporary substitutes can generate significant tax benefits. Ideally, you've implemented automated harvesting processes to capitalize on volatility without making emotional decisions during market stress.
2. Portfolio Rebalancing
Market movements naturally shift allocations away from targets. Given the recent move lower in equities and appreciation of bonds, you may have experienced drift relative to your target allocations. Rather than relying solely on calendar-based approaches, consider a volatility-based rebalancing strategy that responds directly to market conditions. This approach allows portfolios to systematically "buy low and sell high" by trimming outperformers and adding to underperforming assets.Ìý
3. Opportunistic Capital Deployment
For investors with available capital to deploy, you can take advantage of better entry points into U.S. equity markets compared to recent market highs. Historical data suggests that after a 5% pullback, average stock returns one year later are around 12% and markets are higher 75% of the time.Ìý
4. Stick to Your Plan
Perhaps most critically, avoid reactive decisions driven by headlines or short-term market movements. If you have a financial plan, remember that it already incorporates scenarios of significant market stress. Stay disciplined—the benefit of having a plan is you aren't forced to sell at inopportune times because you took too much risk or lacked confidence in your positioning.
During volatile times, you can also take a moment to revisit your long-term goals. This helps you stay focused and keep things in perspective. Try to limit how much you're watching the daily market news; it can often lead to knee-jerk reactions.
Conclusion
While market drawdowns can be stressful, data shows that if you are invested for decades, the negative impacts of short-term market movements are dwarfed by the long-term positives of compounding returns. There can be a significant upside in staying disciplined and taking advantage of the opportunities created by market volatility.
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