Are We Already in a Bear Market?

Friday, 4th of April

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What Moved The Market This Week

Trump’s latest tariffs have caught markets off guard, triggering fears of a global slowdown. Are we in a bear market already? What comes next?

The market has been under pressure, with the S&P 500 now down 12.2% from its 52-week high. The Russell 2000 has officially entered bear territory, while the Nasdaq is down 18%, nearing that threshold. Tech and retail stocks are being hit particularly hard, especially those with heavy exposure to China and Vietnam – the key targets of the latest tariff hikes.

Trump’s newly announced tariffs are striking: 46% on goods from Vietnam and 34% on Chinese imports. There’s still uncertainty as to whether the new 34% Chinese tariffs are being applied on top of the existing 20%, which would bring the total to a staggering 54%.

This is particularly damaging for global retailers. Deckers, for example, produces 64% of its goods in Vietnam, Crocs 44%, Skechers 40% across Vietnam and China. Nike is deeply exposed, with 68% of its footwear and 44% of its apparel produced in those two countries. On Holding has 88% of its production in Vietnam, and Lululemon relies on Vietnam for 40% of its goods.

Risk of Recession Increases

These developments are fuelling global economic concerns.

According to Nomura, the options market is signalling an implied probability of a recession of 49 percent. Just a week ago, the probability was only 20 percent. Market participants have realised that the so-called “Liberation Day,” with the announcement of reciprocal tariffs, has not brought more clarity. Rather, this event serves as a springboard for further uncertainty, countermeasures from trade partners, and an escalation in rhetoric or (hopefully) concessions.

HSBC believes that around 40% of a recession scenario has already been priced into markets. A full recession is clearly not yet priced into the market. On average, the S&P 500 drops about 35% from its peak during a recession. Leading banks like Deutsche Bank, UBS, and Goldman Sachs warn that these tariff shocks could turn into significant macroeconomic disruptions.

Navigating a Bear Market

For those navigating the current landscape, trading in a bear market demands discipline. Holding cash reserves is key. While buying dips can offer opportunity, it’s important to be cautious – not every sharp drop is followed by a strong rebound in a bear market. Investors should aim to limit downside exposure while participating selectively in recoveries.

Sentiment remains fragile. The Fear & Greed Index is deep in the “extreme fear” zone. Notably, there is a strong correlation between the Magnificent 7 and the US dollar. The dollar is falling sharply, while the euro and yen are rising against it. Gold is also performing well. Investors are increasingly seeking safe havens.

In closing, the markets are clearly jittery, and the tariff shock is real. This is a time for focus, flexibility, and risk awareness – not for bold predictions. Stay alert, stay disciplined, and remember: preservation is a strategy too.

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What's Coming Up Next Week

In the coming weeks, any rebound may be limited. HSBC estimates that we've already lost $3 trillion in market value from the S&P 500's peak, which means higher-income households are likely to pull back significantly on spending — increasing the risk of recession. Additionally, even if upcoming quarterly earnings are strong, they won’t be a reliable indicator for the future, as those results were generated before the new tariffs took effect.

Markets are waiting for Friday’s labour market data, which could significantly influence the next move. If employment data disappoints, further downside in equities may follow. It’s also worth noting that March data, reported in April, is unlikely to reflect the impact of tariffs, as they are only now coming into effect.

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Notable Analyst Insights

Citigroup: At Citi, Trump’s tariffs on Taiwan, South Korea, China, Vietnam, and all other imports are viewed as "tangled and practically impossible to fully assess" due to the length and geographic diversity of the semiconductor supply chain. If the tariffs trigger a recession, it would be negative for all semiconductor stocks and could result in at least 20 percent further downside. Citi notes that high-end analog companies like Analog Devices and Texas Instruments have historically outperformed during downturns and are expected to do so again in a recession, with Analog Devices being the preferred choice due to its higher margins. Stocks most at risk in a recession include companies with lower margins like On Semi, Micron Technology, and GlobalFoundries, as well as high-multiple stocks like Broadcom.

J.P. Morgan: Analyst Nora Szentivanyi believes that if the tariffs persist, a recession in the U.S. and globally is likely this year. She argues that the "remarkably large and broad-based increase" in U.S. tariffs by President Trump could plunge both the U.S. and the world into recession. J.P. Morgan sees the high 20 percent tariffs imposed on the European Union as the most significant additional shock to the global outlook. If fully implemented, the effective U.S. tariff rate would likely approach 25 percent. The analyst characterises the full implementation as a "major macroeconomic shock." If these measures continue, both the U.S. and the global economy would likely fall into recession this year.

Goldman Sachs: According to analysts at Goldman Sachs, the tariff announcements were worse than expected. On average, the U.S. now faces 20 percent tariffs, compared to the previous baseline scenario of around 15 percent. This is expected to hurt GDP growth, drive inflation higher, and increase pressure on the U.S. stock market. Uncertainty has not yet been resolved. Even under the previous 15 percent scenario, Goldman had forecast 3.5 percent inflation and a 35 percent chance of recession, with annualised GDP growth at 1.5 percent. Their S&P 500 projections are 5,300 over 3 months and 5,900 over 12 months.

Deutsche Bank: Tariffs on Asian countries are significantly higher than expected. Analysts say attention should now be firmly focused on China. The big negative surprise was the introduction of tariffs over 50 percent on China and the key partner country Vietnam. This affects $600 billion worth of industrial goods shipped to the U.S. The question now is: “How willing is China to wait for trade negotiations and/or offset this negative shock domestically through new stimulus for internal demand?” Or will the country try to "export" the shock to the rest of the world by devaluing the yuan, restoring the competitiveness of Chinese goods and redirecting supply globally?

UBS: Tariffs are at the upper end of forecast ranges. Uncertainty is being replaced by a worst-case scenario. The tariffs announced by U.S. President Trump affect more countries and are higher than even the most pessimistic projections before the announcement. U.S. tariffs could rise from an average of 2.5 percent to as much as 24 percent — a level last seen in the 1920s. The growth-inflation mix for the global economy is deteriorating. Emerging markets are particularly affected. In 2025, real U.S. GDP could shrink by 1.5 to 2 percentage points, and inflation could climb to nearly 5 percent if these tariffs are not rolled back soon.

Wedbush: Analyst Daniel Ives calls Trump’s latest tariffs "worse than the worst-case scenario" Wall Street had feared. While many details still need to be clarified and investors will be focused on specifics over the next 24 hours, the "jaw-dropper" was the 34 percent reciprocal tariff on China, with Taiwan at 32 percent and the EU at 20 percent. He notes that tech stocks like Apple and NVIDIA will be under "major pressure" due to growing concerns over demand destruction, supply chains, and especially the China/Taiwan portion of the tariffs. Ives adds that he will be speaking with companies and investors worldwide in the coming days to better understand the details and scenarios to navigate this "new world Trump has just created."

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Disclaimer: This content is for informational and educational purposes only and does not constitute financial advice. It does not consider your personal objectives, financial situation, or needs. You should consider whether the information is appropriate for your circumstances and seek professional advice before making any investment decisions. Investing in stocks carries inherent risks, and the application of any strategy may not eliminate the risk of loss. Market conditions, volatility, and unforeseen events can impact outcomes, and past performance is not indicative of future results.