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Volatility in Stock Market Amid Trump’s Tariff Policies
In the first half of 2025, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite experienced significant volatility. Following record highs in December 2024 and February 2025, the Dow and S&P 500 entered correction territory by early April, while the Nasdaq Composite faced its first bear market in three years. As of July 2025, both the S&P 500 and Nasdaq have achieved record highs again, with the Dow nearing its all-time high.
President Trump’s tariff policy, introduced on April 2, 2025, included a 10% global tariff and higher reciprocal tariffs on various countries, creating concern over inflation and economic growth. The initial announcement led to the S&P 500’s fifth-largest two-day decline in 75 years. A 90-day pause on certain tariffs, excluding China, began on April 10 and will end on July 9, potentially exacerbating trade tensions and inflationary pressures.
As of December 2024, the S&P 500’s Shiller price-to-earnings (P/E) ratio was at 38.89, one of the highest valuations in history, raising concerns about the sustainability of this market rally. Historical data indicates that sustained high P/E ratios often precede significant market declines, with drops ranging from 20% to 89%, highlighting the importance of corporate earnings quality amid ongoing volatility.
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