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NEW YORK - SEPTEMBER 18: Traders work on the floor of the New York Stock Exchange on September 18, ... More 2008 in New York City. The Dow closed up by more than 400 points following a drop of almost 450 points yesterday in the midst of worldwide financial turmoil. (Photo by Mario Tama/Getty Images)
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U.S. stock market has wiped out $9.6 trillion since Inauguration Day – $5 trillion of which evaporated between April 2 and April 4 which is “the largest two-day loss on record,” according to MarketWatch.
Here are three questions that come to mind and quick answers:
Why? Stocks dropped due to President Trump’s tariffs and the resulting economic uncertainty.
Will stocks keep dropping? Stocks may continue to plunge unless tariffs are lifted.
What should investors do? Investors should avoid panic selling and ought to evaluate whether to diversify by placing bets – such as buying an exchange traded fund tracking the Chicago Board of Trade’s Volatility Index – which measures expected 30-day volatility in the S&P 500, according to Bloomberg – tends to rise in value as stocks fall.
Or you could put more cash into a money market fund whose yield would rise if the Fed decides rates are too low to fight tariff-induced inflation.
Five Whys Analysis Of $9.6 Trillion Stock Market Drop
The root cause of this rapid loss in stock market value is the expectations-beating magnitude and breadth of Trump’s tariffs and the belief that the resulting uncertainty will result in economic contraction and lower stock prices.
Here is a “Five Whys” analysis on which to base this conclusion:
Why has the U.S. stock market lost $9.6 trillion in value since January 17, 2025? The stock market declined due to the implementation of Trump’s tariffs which reduced investor confidence and caused “massive sell-offs,” according to MarketWatch.
Why did Trump implement these new tariffs? Trump aimed to reduce the U.S. trade deficit – to rectify what he views as other countries taking unfair advantage of America – and to promote domestic manufacturing, Axios reported.
Why did the tariffs affect investor confidence and lead to sell-offs?Investors feared that the tariffs would increase costs for businesses, leading to higher consumer prices (inflation), reduced corporate profits, and potential retaliatory measures from other countries, all of which could slow economic growth and potentially lead to a recession, noted BusinessInsider.
Why would increased costs and retaliatory measures slow economic growth?Higher costs from tariffs can reduce consumer spending power and corporate profitability. Retaliatory tariffs from other countries can decrease U.S. exports, further harming businesses and potentially leading to job losses, thereby slowing down the overall economy, according to The Guardian.
Why did the market react so strongly and rapidly to these tariff announcements? The scale and abrupt implementation of the tariffs – in March, investors were expecting tariffs to rise 8.6 percentage points in 2025 while Trump raised them nearly 20 percentage points on April 2, noted the Wall Street Journal. This raised investor uncertainty – prompting swift adjustments to their portfolios in anticipation of negative economic impacts, leading to a rapid decline in stock prices, noted by April 3 Forbes post.
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