The US stock market has taken another hit following President Donald Trump’s refusal to rule out a recession with the Dow plummeting more than 300 when trading opened this morning.
Investors continued to be spooked by the trade war launched by the White House with tariffs of up to 25 per cent hitting Canada, Mexico and China last week.
This has been compounded by Trump delaying tariffs on certain imports that are not complaint with the United States-Mexico-Canada-Agreement until April.
Analysts have cited this perceived backtracking on the White House’s key economic policy as causing market volatility.
In pre-market trading, the Dow Jones Industrial Average slipped nearly 400 points while the S&P 500 and Nasdaq lost 1.8 per cent and 2.8 per cent, respectively.
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Over the weekend, Trump was asked if his administration was preparing for a likely recession while appearing on Fox News.
He replied: “I hate to predict things like that. There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America.
“That’s a big thing. And there are always periods of, it takes a little time. It takes a little time, but I think it should be great for us.”
A recession is defined as happening when a country’s economy experiencing two consecutive quarters of negative gross domestic product (GDP) growth.
Overnight, the yield on two-year US Treasury bonds fell back below four per cent in Asian trading hours following the President’s comments.
US Treasury Secretary shared a similar sentiment to Trump during an interview with CNBC on Friday (March 7), citing the administration’s goal of US bond yields falling; the benchmark of borrowing costs.
Returns awarded to investors in the short-date bond have fallen sharply over the past month since the White House’s trade war began.
Tracy Chen, a portfolio manager at Brandywine Global Investment Management, broke down Wall Street’s thinking when it comes to the new status quo for US fiscal policy.
David Morrison, a senior market analyst at Trade Nation, added: “It’s difficult to pinpoint the main catalyst for this morning’s sell-off, but there are several possible factors. First up, uncertainty surrounding Trump’s tariffs.
“The President appears to be taking a scatter-gun approach in terms of targets, while teasing the markets with last minute reprieves, delays or softening in scope. All-in-all, it’s proving difficult to price all this in. Federal Reserve Chair Jerome Powell alluded to this in a speech on Friday.
“But he repeated his view that the Fed should remain patient and be in no rush to cut rates further until they had more clarity over inflation and other economic indicators.
Aside from this, there are some concerns over the US economy. Recent data, particularly those numbers which attempt to measure confidence, have deteriorated. There’s also been some mixed jobs data, although Friday’s Non-Farm Payrolls were relatively benign.”
