Trump triggers market turmoil in US and elsewhere

When Donald Trump’s victory in the November 5 US elections was announced, the surge on Wall Street was attributed to the “Trump effect”.

Now, with a little over a month of the new president being in office, the Trump effect is back. Only this time, instead of the surge, it is more of a downward spike.

Global stock markets stutter

Global stock markets tumbled Tuesday (February 25), with technology shares taking the hardest hit, after US consumer confidence plummeted amid growing fears over President Donald Trump’s tariff plans.

The Conference Board reported that US consumer confidence in February experienced its steepest monthly drop since August 2021. The sharp decline adds to a string of disappointing US economic data, amplifying investor unease.

“Consumers’ confidence has deteriorated sharply in the face of threats to impose large tariffs and to slash federal spending and employment,” Samuel Tombs, chief US economist at Pantheon Macroeconomics, wrote in a note to clients.

Markets were further rattled after Trump signalled he would move forward with a 25 per cent levy on imports from Canada and Mexico starting in early March. The announcement fuelled concerns that US economic momentum may be slowing, undermining what investors have seen as the country’s economic exceptionalism.

The impact rippled across global markets. In addition to stock declines, safe-haven US Treasury prices surged, driving yields to two-month lows as traders sought refuge from the volatility.

Cryptocurrencies stumble

Cryptocurrency markets were also swept up in the turbulence. Bitcoin plunged below $90,000 for the first time since November 18, falling 7.25 per cent on the day to $87,169.76. The drop came as worries over Trump’s tariffs compounded the negative sentiment following last week’s $1.5 billion hack of ether from the Bybit exchange.

“Investor confidence is clearly shaken,” said Greg McBride, chief financial analyst at Bankrate. “Concerns about overvalued markets, tariffs, and a slowing economy are converging to create a perfect storm.”

A new survey by Charles Schwab released Tuesday revealed that two-thirds of traders believe the stock market is currently overvalued. The survey, which polled 1,040 active trader clients between Jan. 8-17, pointed to megacap technology and artificial intelligence stocks as among the most crowded trades.

Traders are increasingly worried that peak corporate profit margins and market froth could lead to further corrections, especially as the Federal Reserve remains cautious on interest rates.

Inflation concerns continue

With inflation continuing to weigh on consumers and uncertainty surrounding Trump’s tariff strategy, the Federal Reserve left its key borrowing rate unchanged at its last meeting after cutting it during the previous three sessions.

Policymakers at the central bank have signalled a wait-and-see approach, assessing how trade tensions and potential federal spending cuts could impact the broader economy.

With inputs from agencies