Global markets experienced a dramatic sell-off on Monday, April 7, 2025, as investors reacted to President Donald Trump’s sweeping tariff plans. The S&P 500 futures plunged toward bear market territory while major investment banks, led by Goldman Sachs (NYSE:GS) and J.P. Morgan, raised their recession probability forecasts significantly.
Markets in Freefall as Bear Market Looms
Global financial markets are experiencing their most significant sell-off since the COVID-19 crash of March 2020, with U.S. futures pointing to a dramatically lower open. The S&P 500 is on pace to confirm a bear market that technically began in February if it closes down 20% from its all-time highs.
The plunge has been primarily driven by President Trump’s announcement of extensive tariff plans, which has sent investors rushing toward government bonds and safe-haven assets. In just two trading sessions following Trump’s tariff decision, nearly $5 trillion in market value has been erased as the index tumbled over 10.5%.
The tech-heavy Nasdaq has already entered bear market territory, while the Dow Jones Industrial Average has slumped more than 10% from its record high. Asian markets were hit particularly hard, with the Hang Seng Index dropping over 13%, while European markets uniformly declined by 4-6%. The CBOE Volatility Index (VIX), Wall Street’s fear gauge, has spiked dramatically to above 52, reflecting extreme market anxiety.
Recession Odds Surge as Banks Revise Economic Forecasts
Goldman Sachs has raised its U.S. recession probability forecast to 45%, up from 35% last week and 20% just days earlier, highlighting the rapidly deteriorating economic outlook. This marks the second time in a week the bank has increased its recession odds. At least seven major investment banks have followed suit in raising their recession risk forecasts, with J.P. Morgan taking the most pessimistic view at 60% probability.
The market turbulence has prompted Goldman Sachs to lower its U.S. economic growth outlook for 2025 to 1.3% from 1.5%, though this remains more optimistic than Wells Fargo (NYSE:WFC) Investment Institute’s 1% growth forecast and J.P. Morgan’s projection of a 0.3% quarterly contraction.
As recession fears mount, expectations for Federal Reserve intervention have accelerated.
Trade War Escalation and Market Outlook
President Trump told reporters late Sunday that investors “must endure the consequences” of his trade policies and that he would refrain from negotiating with China until the U.S. trade deficit is addressed. China has already announced retaliatory measures to Trump’s tariffs, raising concerns about a full-blown trade war that could further destabilize global markets.
The Treasury market reflects this pessimism, with the 10-year US Treasury yield falling to 3.953% as investors price in a significant chance of a fifth interest rate cut from the Federal Reserve this year. Some traders are now seeing a 54% possibility of a rate cut as early as May, indicating growing concerns about economic conditions.
The coming week will be crucial for market direction, with the US consumer price data scheduled for Thursday taking center stage. This inflation report could significantly influence Federal Reserve policy decisions in the months ahead as policymakers balance concerns about inflation against growing recession risks amidst the escalating trade tensions.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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