The S&P 500 (SPX), the world’s leading index comprising the biggest 500 traded companies, is now lagging. In one of its worst weeks in decades, the index dropped 3.1%, erasing over $3 trillion in value since its February peak. Meanwhile, global markets have performed better, which might be signaling a shift in investor confidence. The U.S. share of global market capitalization has also fallen below 50%, marking a decline in dominance.
Several factors are driving this downturn. The U.S. economy shows signs of weakness, with declining home sales, rising unemployment claims, and slowing consumer spending. These concerns have created a solid infrastructure for investors’ hesitance, leading to market pullback. Nevertheless, the overall reaction to President Trump’s ongoing trade wars has had an adverse effect on the market and is considered a primary catalyst to the index’s recent slump.
Tariffs Uncertainty and Tech Stocks Decline
Trade policy uncertainty has added to the pressure. President Trump’s tariffs, including a 25% tariff on Canadian and Mexican goods that has now been delayed to April, have clearly unsettled markets. Also, the ongoing trade tensions with China and threats of further tariffs on other nations have only worsened investor sentiment. With global trade facing potential disruptions, companies that rely on international markets could suffer, further weighing on stock performance.
The technology sector, a major driver of the S&P 500, has been hit hard. Giants like Nvidia (NVDA) and Tesla (TSLA) have lost hundreds of billions in market value, dragging the index down. For example, Nvidia has lost $35 in stock value since Jan. 23, which amounted to roughly $854 billion. Tesla has shed over $160 in stock value during the same time frame, accumulating over $500 billion in losses. A staggering numbers by all accounts.
Given its heavy tech weighting, the S&P 500 has struggled more than its global counterparts that are less reliant on this sector.
Investing Elsewhere?
The question now is whether this trend will continue. Historically, when the S&P 500 falls behind early in the year, it rarely recovers to outperform global markets. U.S. stocks may struggle if economic conditions and trade tensions don’t improve. This raises an important question for American investors: Should they stick with U.S. stocks or start looking at global opportunities? If the current trends persist, diversification outside the U.S. could become an increasingly attractive option.
Tipranks’ Comparison Tool
Using Tipranks’ Comparison Tool, we can examine notable S&P 500 Index ETFs and how they perform and their near-term outlook.
