US stocks fell sharply on Monday after President Donald Trump said the economy could face ‘a period of transition’ and didn’t rule out a possible recession. His comments, made during an interview on Sunday, worried investors who are already on edge over his tariff policies.
In the interview on Fox News’ “Sunday Morning Futures With Maria Bartiromo”, Trump was asked if he expected a recession this year. He responded, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”
As a result, all three major stock indexes dropped significantly. The Dow Jones opened around 400 points lower and fell further, dropping by 450 points or 1.06%. The S&P 500 fell by 2%, and the Nasdaq Composite dropped 3.2%.
Tech stocks were hit hardest, dragging the Nasdaq into correction territory. Tesla (TSLA) dropped over 8%, Palantir (PLTR) fell more than 7%, and Nvidia (NVDA) was down 4%.
By Monday morning, Tesla had lost all of its gains since Trump’s reelection in November.
Stocks have been struggling this month due to uncertainty around Trump’s shifting tariff policies. Last week, the S&P 500 dropped 3.1%, marking its worst week since September.
Trump has threatened high tariffs on imports from Canada and Mexico, but postponed them until April 2. He also raised the tariff on Chinese imports from 10% to 20%, and a 25% tariff on steel and aluminum is set to take effect on March 12. Additionally, Trump threatened a 250% tariff on Canadian dairy products and a “tremendously high” tariff on Canadian lumber. On Sunday, he mentioned that tariffs might increase over time.
David Bahnsen, chief investment officer at the Bahnsen Group, said, “The talk of tariffs is, in a lot of ways, worse than the implementation of them. The tariff talk, reversal, speculation, and chaos only fosters uncertainty.”
He added, “I do not believe the administration knows how the tariff situation will play out, but if I were a betting man, I would say it will persist long enough to damage economic activity for at least a quarter or two, and ultimately result in a deal with different countries that will make everyone wonder why we went through all the fuss.”
Meanwhile, the economy shows more signs of trouble. Job cuts are rising, hiring is slowing down, consumer confidence is dropping, and inflation is increasing.
The yield on the 10-year US Treasury note fell to 4.218%, indicating that investors are worried about uncertainty and slow economic growth.
This week, investors will be paying close attention to monthly inflation data set to be released on Wednesday and Thursday to see if inflation remained high in February.
A recession is typically defined as two consecutive quarters of negative GDP growth. According to the National Bureau of Economic Research, a recession happens when there is a significant and widespread decline in economic activity that lasts for several months.
Sam Stovall, chief investment strategist at CFRA Research, said, “How long this period of investor caution lasts depends on how quickly the global trade issues, and the fear of recession, are resolved.”
