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Strategies
With stocks in a steep decline and tariffs inducing recession jitters, the patience of investors may be tested.
April 5, 2025, 5:03 a.m. ET
The notion that the Federal Reserve will rush in to rescue investors in a crisis has comforted investors for decades. But in the big market downturn induced by President Trump’s tariffs, no Fed rescue is in sight.
Jerome H. Powell, the Federal Reserve chair, made that clear on Friday. The tariffs are much “larger than expected,” he said, and their immense scale makes it especially important for the central bank to understand their economic effects before taking action.
“It is too soon to say what will be the appropriate path for monetary policy,” he said at a conference in Virginia.
In fact, I’d say, the likelihood of further market declines is much greater than the chance that the Fed will turn the markets around in the immediate future.
What U.S. stock investors have experienced until now is what’s known on Wall Street as a correction — a decline of 10 percent or more from a market peak. The correction doesn’t end, by this common definition, until the markets have turned around and that peak has been surpassed. For days, though, the market momentum has been almost entirely downward. So another dubious distinction is in sight: a bear market, which is a decline of at least 20 percent from a market top. For the S&P 500, which closed at 5,074.08 on Friday, down from its peak of 6,144.15 on Feb. 19, a bear market is already within shouting distance, a scant 2.6 percentage points away.
It would be lovely to be able to say that the stock market bottom is near, or that it has already been reached, Edward Yardeni, a veteran market watcher, said in a conversation on Friday.
