For the first time in over a year, the U.S. stock market is in a correction. The question now is whether the slide is set to get worse.
The benchmark stock index closed down more than 10% from its February 19 closing high, meeting the widely used definition of a correction. The S&P 500's slide follows a similar drop for the tech-heavy Nasdaq Composite (.IXIC) index, which last week confirmed it was in a correction.
The S&P 500's decline translates to a loss of about $5 trillion in market value from the February highs and marks a sharp about-face in sentiment from the start of the year when Wall Street was largely cheering much of Trump's agenda. The index last marked a correction in late 2023.
Here is a look at how markets have fared, and what could lie in store for investors.
MARKET CORRECTIONS
Stock market corrections are fairly common, with the S&P 500 logging a correction 56 times since 1929, according to a Reuters analysis of data from Yardeni Research.
Of these, only 22 morphed into bear markets, defined as a fall of 20% or more from most recent record highs, the data showed.
Corrections, if they do not turn into a bear market, do much less damage to markets.
Since 1929, corrections on average resulted in an average peak to trough decline of 13.8%, as opposed to an average decline of 35.6% during bear markets, the data showed.
Still, investors can take their time piling back into stocks. The average correction lasts 115 days, Yardeni Research showed. The current correction has lasted 22 days so far.
TARIFF TROUBLE
The Trump administration's back-and-forth tariff moves against major trading partners like Canada, Mexico and China have played a key role in dampening investors' appetite for riskier assets.
Investors and analysts worry that escalating trade tension could fan inflationary pressures and potentially stall economic growth, raising the specter of a recession.
Uncertainty over tariffs has rattled investor nerves and sparked worries that the so called "Trump put" - the idea that counts on the president doing whatever it takes to keep the stock market happy - has gone missing.
HAVEN HUNT
Investors have reached for a variety of traditional safe havens in preparation for further market turmoil.
The yen, long considered a safe haven due to Japan's large net foreign asset holdings and historically low interest rates, has risen 6.5% this year, amid a broad-based selloff in the dollar.
The price of gold, considered a hedge against uncertainties, hit a record high on Thursday, having climbed more than 13% for the year.
Increasing risk that the U.S. economy will stall has sent investors seeking the safety of U.S. Treasuries. The rally in bond prices has sent benchmark 10-year yields, which move inversely to bond prices, to 4.296%, down about 50 basis points since mid January.
Even within stocks, investors have gravitated toward less risky parts of the market, with the S&P 500 Healthcare and Consumer Staples (.SPLRCS) sectors up 4.5% and 1.3% for the year, respectively.
UNCERTAIN TIMES
Rapidly evolving policy has increased uncertainty for businesses, consumers and investors, prompting a surge in caution.
The U.S. Economic Policy Uncertainty Index, which analyzes newspaper articles with keywords related to economic and policy uncertainty, along with tax code changes and other economic data, recently jumped to its highest since July 2024.
Higher policy uncertainty bodes ill not just for the stock market, but also for business investments and for consumer spending.
On Monday, Delta Air Lines (DAL.N), slashed its first-quarter profit estimates by half, and its CEO said the environment had weakened due to U.S. economic uncertainty.
BEARS ROAR
Individual investor pessimism over the short-term outlook for U.S. stocks is at a more than two-year high in the latest American Association of Individual Investors (AAII) Sentiment Survey.
The change in sentiment has been accompanied by institutional investors slashing equity allocations. Investors' equity positioning dipped to slightly underweight for the first time since briefly hitting that level in August, Deutsche Bank analysts said in a note on Friday.
Meanwhile, the Cboe Volatility Index (.VIX), an options based measure of investor demand for protection against market declines has jumped to a 7-month high of 29.57, compared with its long-term median reading of 17.6.
WHAT GOES UP...
The "Magnificent Seven" stocks, which for the better part of the last two years led the market's gains, have largely struggled in 2025.
With investors becoming more risk-averse, seeking safer investments, these tech and growth giants have experienced declines exceeding those of the broader market.
The average "Mag 7" stock is down about 17% since the S&P 500 peaked on February 19, with Tesla down about 33%.
With investors reducing their exposure to these once high-flying stocks, this correction could prompt a change in market leadership to other sectors.
