The U.S. stock market has experienced a significant decline, losing $5 trillion in value over the course of three weeks. The market value of the S&P 500 reached a peak of $52.06 trillion on February 19, according to data from FactSet. However, by Thursday, the index’s market value had dropped to $46.78 trillion, a staggering loss of approximately $5.28 trillion.
This sharp downturn has taken place amid various economic and geopolitical factors. Trade tensions between the United States and several of its major trading partners have been ongoing, with headlines about tariffs frequently impacting market movements and contributing to overall volatility. Economic indicators have also shown signs of slowing growth, further fueling investor anxiety.
Weak consumer sentiment surveys and tepid outlooks from businesses have added to the concerns.
Stock market’s staggering drop
Emmanuel Cau, a strategist at Barclays, noted in a client memo that there is growing worry about erratic policy decisions from the new administration, which he described as an “uncertainty tax” affecting growth expectations.
The sell-off has been further exacerbated by the unwinding of investments in AI-related stocks. Since February 19, shares of Nvidia have fallen by 17%, while the Roundhill Magnificent Seven ETF has dropped by 16%. The pre-correction surge in AI-related stocks had led to fears of an overvalued market, with some of these companies’ market caps exceeding $3 trillion at their peak.
Despite the downturn, the S&P 500 is still trading at a price-to-earnings ratio of 24.1 based on its trailing 12-month earnings, which is significantly above its long-term average, according to FactSet data. Analysts and investors are closely monitoring these developments as they assess the ongoing risks and potential recovery of the stock market. The correction to an earlier version of this report clarifies that since February 19, Nvidia is down 17% and the Roundhill Magnificent Seven ETF has fallen 16%.
