The Stock Market May Do Something Last Seen During the Great Recession. A Sharp Decline Could Follow.
News Summary
The S&P 500 is on track for its worst November since the Great Recession in 2008, having already declined over 1.2% month-to-date, defying the month's historical trend as the best for U.S. stocks. This performance is driven by persistent concerns over the economy and stock market valuations. Investors are worried the Federal Reserve will not cut interest rates in December, despite futures markets previously pricing in a near 100% chance. President Trump's administration's tariff policies are cited for raising prices, with Goldman Sachs estimating U.S. companies and consumers will collectively pay 77% of tariffs by the end of 2025, and consumers alone over 50%. Economists widely expect inflation to remain above 3% through mid-next year, well above the Fed's 2% target. Historically, the S&P 500's forward price-to-earnings (P/E) multiple recently exceeded 23, a level only seen once in the last 25 years (mid-2020 during COVID-19), which preceded a 25% bear market decline. Consumer sentiment has also fallen to its second-lowest reading ever, indicating potential further economic weakening. The Trump administration's trade policies are implicated in contributing to price pressures and business uncertainty, potentially leading to a bear market.
Background
Currently, the S&P 500 is experiencing its sharpest November decline since the Great Recession in 2008. Historically, November has been the best month for the U.S. stock market, with an average gain of 2.2% since 1980. The Federal Reserve aims to maintain an inflation rate around 2%. However, inflation persistently above 3% has significantly dampened market expectations for a December rate cut. The trade policies of President Donald Trump's administration, particularly its imposed tariffs, are noted for raising the average tax on U.S. imports to the highest level since the 1930s.
In-Depth AI Insights
Are the economic implications of the Trump administration's tariff policies fully priced into the market? - Despite prior government claims that tariffs are largely paid by foreign exporters, Goldman Sachs' estimates and the administration's