Stocks are about to close the first quarter of 2025 at their lowest levels of the year. President Trump's imposed tariffs have significantly contributed to the recent decline in the market, with the S&P 500 dropping by 5.75% in March alone.
The upcoming event, "Liberation Day" on April 2, where investors anticipate hearing more about reciprocal tariffs under Trump's administration, is approaching quickly. However, market strategists are cautious, doubting that these tariff decisions will resolve all the underlying problems that emerged in the market during the initial quarter.
Citi's head of US equity strategy, Stuart Kaiser, expressed in a client note that they are not rushing to buy during this dip, as the uncertainties that triggered the market downturn persist. The recent market slump is not just due to one factor but a combination of deteriorating factors like earnings forecasts, consumer and business morale, and weakening economic reports.
The technology sector has experienced significant selling pressure, especially as the market started the year with tech stock valuations at historically high levels. Events such as the emergence of competitive low-cost AI technology in China and concerns over tariffs impacting investors' risk appetite have fueled the selling spree, particularly affecting the top-performing tech stocks of recent years.
Despite the tech sector's recent struggles against the S&P 500, there are doubts whether these leading tech companies can fuel the index's recovery. With the significant impact these stocks have on the market, analysts believe that a sustainable rally to record highs for the benchmark index is unlikely without the participation of these major tech players.
Barclays' Venu Krishna expressed positive sentiment towards Big Tech in the medium to long term. However, in the near future, there seem to be few catalysts to drive a quick recovery in that sector.
One of the main concerns affecting both Big Tech and the broader market is the downgrading of growth forecasts for the year. Initially, expectations were for the US economy to maintain above-trend growth in 2025. However, the latest data shows a different picture, with consumer spending dipping for the first time in almost two years in January, and a smaller rebound than predicted in February. Goldman Sachs has revised its annualized growth estimate for the US economy to 0.2%, significantly lower than the initial projection of around 2.4%.