The Market Snaps Its Losing Streak. Don’t Let Your Guard Down.

The U.S. stock market has been on a rollercoaster ride in 2025, with the S&P 500 crossing into correction territory in early March. After a 10% drop from peak levels, the market’s decline appears to reflect uncertainty surrounding new Trump administration tariff policies and growing economic concerns. Despite the market’s gyrations, many underlying fundamentals remain positive. Consumers are in a good spot, and companies are flush with cash. However, the recent focus on new tariff policies is a critical market factor, according to Eric Freedman, chief investment officer for U.S. Bank Asset Management. “There’s been a lot for the market to absorb with the on-and-off status of tariffs, their size, the countries affected and mechanisms by which tariffs will be enacted,” Freedman says. The pace of change has given companies and consumers a lot to take in over a short period of time.



The same three sectors that drove stellar 2023 and 2024 S&P 500 performance—information technology, communication services, and consumer discretionary stocks—now weigh the market down. The three sectors account for 50% of the S&P 500’s market capitalization. All three are in negative territory year-to-date, with particularly sharp drops for information technology and consumer discretionary stocks. Similarly, performance by market capitalization has also shifted. In 2023 and 2024, large-cap stocks significantly outpaced mid-cap and small-cap stocks. In 2025, stocks are down across the board. Small-cap stocks are underperforming the other two categories, mid-cap stocks have held up best.

Even as the U.S. stock market struggles, global equities are in positive territory year-to-date. Through March 17, 2025, the MSCI EAFE Index, a measure of foreign developed market large-cap stock performance, generated a 10.8% total return, a 14% performance advantage over the S&P 500. “We’re seeing better equity market sentiment outside of the U.S.,” says Haworth. “This is fueled in part by proposed increases in fiscal spending, particularly for defense purposes in light of an apparent U.S. pullback in support of NATO allies.”

Escalating volatility is a notable market dynamic so far this year. The CBOE’s Volatility Index is considered a critical market volatility measure. It is often referred to as the “fear index.” Haworth says the VIX rising into the 20+ range indicates weaker market sentiment. The gauge peaked above 27 just before the market fell into correction territory. It has since retreated, but remains above 20. The University of Michigan’s Consumer Sentiment Index dropped 11% in March from February, and 27% below its year-ago level. It’s not clear whether flagging consumer sentiment is a harbinger of subsequent economic performance. The recent focus on new tariff policies is a critical market factor, according to Freedman. “There’s been a lot for the market to absorb with the on-and-off status of tariffs, their size, the countries affected and mechanisms by which tariffs will be enacted.” Freedman says the pace of change has given companies and consumers a lot to take in over a short period of time. In addition, Trump’s policy shifts on the Russia-Ukraine war, temporarily pausing U.S. financial support for Ukraine, heightened geopolitical concerns. This too contributed to further investor uncertainty.

The market’s recent decline is largely attributed to uncertainty surrounding new Trump administration tariff policies. Rob Haworth, senior investment strategy director for U.S. Bank Asset Management, states, "Uncertainty is the driver around the market’s recent selloff." The potential economic consequences of these policies, including increased tariffs for goods imported to the U.S., could further impact market recovery. Investors should prepare by staying informed about policy changes and considering the potential impact on their portfolios. Trump’s policy shifts on the Russia-Ukraine war, such as temporarily pausing U.S. financial support for Ukraine, have heightened geopolitical concerns. This has contributed to further investor uncertainty. Investors should monitor geopolitical developments and consider diversifying their portfolios to mitigate risks associated with geopolitical instability. There are growing concerns about potential economic weakness due to tariff impacts. Haworth notes, "There are growing concerns about potential economic weakness, due in part to tariff impacts." Investors should be prepared for potential economic slowdowns and consider investing in sectors that are less sensitive to economic cycles. Escalating volatility is a notable market dynamic so far this year. The CBOE’s Volatility Index (VIX), often referred to as the "fear index," has risen into the 20+ range, indicating weaker market sentiment. Haworth says, "Volatility is probably in the cards for at least the next couple of weeks and could extend beyond that depending upon what the back-and-forth looks like when it comes to tariffs." Investors should be prepared for continued volatility and consider strategies to manage risk, such as diversifying their portfolios and using hedging strategies. The University of Michigan’s Consumer Sentiment Index dropped 11% in March from February, and 27% below its year-ago level. This decline in consumer sentiment could be a harbinger of subsequent economic performance. Investors should monitor consumer sentiment indicators and consider the potential impact on consumer spending and economic growth.

In summary, investors should prepare for potential market derailments by staying informed about policy changes, monitoring geopolitical developments, considering the potential impact of economic weakness, being prepared for continued volatility, and monitoring consumer sentiment indicators. By taking these steps, investors can better navigate potential challenges and position their portfolios for long-term success.