The S&P 500's Longest Losing Streak In 7 Months Is Sparking Fears Of A 'Looming Bear Market'

Recently, the tariff policies implemented by the Trump administration have been making investors increasingly nervous. Wall Street is concerned that trade conflicts could trigger the risk of an economic recession, further plunging U.S. stocks into a bear market.

Last Friday, the U.S. stock market continued its weak performance over the past month, with the S&P 500 index falling for the fourth consecutive week, marking its longest losing streak since August of last year. Meanwhile, the Dow Jones Industrial Average experienced its worst week since March 2023.

Ask Aime: What is the likelihood of a U.S. economic recession triggered by trade conflicts, and how might it affect the S&P 500 and Dow Jones Industrial Average in the short term?

In response to the prevailing pessimism in the market, U.S. Treasury Secretary Bessent stated in an interview that the current market adjustment is "normal" and, overall, a healthy phenomenon.

Despite this, concerns remain about the possibility of the U.S. slipping into an economic recession. Renowned research firm Yardeni Research warned in a report on Monday, Historically, almost every bear market has been accompanied by an economic recession. The firm cautioned that although current valuations are already significantly high, they might still be sustained if there is no clear risk of a recession.

Deutsche Bank analyst Jim Reid cited recent research indicating that in 12% of cases when the S&P 500 index entered a correction, an economic recession had already occurred. However, data shows that in most cases (about 88%), the U.S. economy did not immediately fall into a recession when the market entered a correction phase.

During his media interview, Bessent emphasized that the U.S. economy might currently be undergoing an "adjustment period," especially following the implementation of new government policies. While he acknowledged that the U.S. economy is not entirely safe and a recession is not inevitable, he pointed out that the past massive government spending was unsustainable. The White House is now implementing a series of new policies to address this situation.

Nevertheless, the Trump administration's high tariff measures continue to raise market concerns. Some analysts even believe that these measures could ultimately lead to a sustained decline in the stock market, creating a negative wealth effect and accelerating the onset of an economic recession.

CFRA Chief Investment Strategist Sam Stovall noted that since February 19 of this year, the S&P 500 index has experienced a significant pullback from its peak, primarily due to the pressure from the Trump administration's tariffs on major U.S. trading partners. He warned that the artificial resistance caused by tariff policies has reignited market concerns about a potential economic recession.

Meanwhile, Yardeni Research analyzed that during typical market corrections, stock valuations decline while corporate earnings expectations remain relatively stable or show moderate growth. However, entering a bear market often signals an economic recession, with both earnings expectations and valuations experiencing significant declines.

A key uncertainty facing the U.S. economy lies in the future direction of the Trump administration's trade policies. While optimistic investors still hope that the Trump administration might soften its stance due to political pressure, an increasing number of pessimistic investors fear that by the time the administration relents, the U.S. economy might already be in a consumer-driven recession, with the stock market entering a bear phase.

In Yardeni's view, bulls will remain hopeful that Trump is merely using his "Mr. Tariff" persona as a negotiating tactic and may eventually ease tariff policies. However, bearish investors worry that by the time Trump changes his stance, the U.S. economy will already be deep in a consumption-led recession.

Although the U.S. economy currently stands on relatively solid ground, uncertainties are mounting. Analysts point out that the ongoing uncertainty caused by Trump's tariff policies could lead businesses and consumers to delay long-term investments and purchases of durable goods, thereby exerting downward pressure on economic growth. This uncertainty is becoming a significant risk for the U.S. and global economies in 2025 and beyond.