Since the November election of President Donald Trump, the S&P 500 has seen a decline of roughly 5.9%, while the Nasdaq has lost about 8.7%, reflecting growing uncertainty in financial markets. A key inflation measure from the Bureau of Economic Analysis showed prices rising faster than expected in February, reinforcing expectations that the Federal Reserve will keep interest rates elevated to combat inflationary pressures.
Adding to the unease, a University of Michigan consumer sentiment survey revealed that inflation expectations among consumers were rising sharply. Many Americans fear the impact of new tariffs imposed under the Trump administration, which could exacerbate price increases and slow economic growth. The same report also indicated growing concerns about job security, with expectations of higher unemployment in the coming year. Additionally, fewer consumers believe they will be better off financially in the near future, highlighting deteriorating confidence in the economy.
Wall Street’s pessimism was further fueled by skepticism over the massive investments in artificial intelligence that have driven significant stock gains in recent years. Shares of Nvidia, one of the biggest AI beneficiaries, fell nearly 2% on Friday, extending its decline to 27% from its January peak. This drop has erased approximately $1 trillion in market value from the semiconductor giant.
Investor anxiety deepened following a report suggesting that Microsoft had scaled back its plans for new data center expansion in the U.S. and Europe. The speculation raised concerns that companies may be slowing their AI-related spending, which has been a key driver of stock market growth. In response, Microsoft stated that its infrastructure expansion remains strong but acknowledged that adjustments are being made to optimize investment strategy.
Microsoft’s statement followed another blow to AI-related stocks. Cloud computing company CoreWeave faced difficulties with its initial public offering (IPO), reducing its proposed share price range before launching its stock. The company’s shares opened below expectations, signaling waning investor enthusiasm for AI-centric businesses.
The market’s struggles reflect a confluence of factors. Inflation pressures remain persistent, leading to expectations of prolonged higher interest rates. At the same time, consumer sentiment has taken a hit due to inflationary concerns and policy uncertainties. Additionally, investors are growing wary of the sustainability of AI-driven stock market gains, particularly as tech giants adjust their spending strategies.
Scott Helfstein, head of investment strategy at Global X, noted that the market is facing pressure from multiple angles, including upcoming reciprocal tariffs that could hit key exporting sectors like technology. He also pointed to the strain on consumer spending, which is being squeezed by inflation and economic uncertainty.
However, Helfstein suggested that the market’s reaction may be a temporary adjustment rather than a sign of deeper economic distress. Despite the recent turbulence, he pointed out that money market funds have not seen significant inflows, indicating that many investors are choosing to weather the storm rather than pulling out of equities entirely.
With inflation concerns mounting and uncertainty surrounding AI investments and consumer spending, Wall Street remains on edge. Investors will be closely watching economic data and Federal Reserve signals in the coming weeks to gauge the market’s next moves. Until clearer direction emerges, volatility is likely to persist, keeping investors cautious about what lies ahead for the stock market.
