S&P 500 on the Edge of Correction as Market Headwinds Mount
A looming correction, trade war uncertainty and a government shutdown deadline—markets are facing a high-stakes week ahead.
The S&P 500 is on the brink of its first correction in 16 months, and with a packed economic calendar ahead, the index could easily tip over the edge. Since peaking on Feb. 19, the SPDR S&P 500 ETF Trust (SPY) has fallen 8.6%, just shy of the 10% correction threshold.
The tech-heavy Nasdaq has already entered correction territory. The Invesco QQQ Trust (QQQ) has tumbled 12.5% from its all-time high, dragged down by the same culprit that’s pressuring the broader market—Trump’s trade war and the uncertainty it’s creating for businesses and the economy.
Correction Follows Trade War Uncertainty
While tariffs alone may not be enough to push the United States economy into a recession, they are undoubtedly a drag on growth. But the bigger issue might be uncertainty. Businesses are holding off on investments, waiting for clarity on policy, but Trump’s day-to-day shifts on tariffs make that clarity impossible to come by.
Another batch of Trump’s tariffs is set to take effect in April, expanding the number of countries affected by the trade war. If there’s any silver lining, it’s that tariff policy may stabilize after that point—but there’s still nearly a month of policy unpredictability before we get there.
Of course, markets are forward-looking, and stocks may bottom out before then if economic data suggest the economy is holding up. A glimpse of that came on Friday, when the market finished higher following a jobs report that, while not spectacular, was decent enough to assuage recession fears—for now.
The Fed & Government Gridlock
Beyond tariffs, investors are watching the Federal Reserve closely. Expectations are growing that the central bank will cut rates later this year to offset economic weakness. If next week’s Fed meeting signals that rate cuts are likely, that could provide support for equities and help put a floor under the market.
At the same time, there’s another risk factor lurking: the looming government shutdown deadline on Friday. With Congress still at an impasse over funding, another shutdown would add more uncertainty and further pressure both consumer and business confidence.
As markets navigate this storm of trade tensions, monetary policy shifts, and government gridlock, investors should brace for a volatile stretch ahead. Whether the S&P 500 officially enters correction territory may hinge on how these key catalysts unfold in coming days.
