As 2025 unfolds, investors initially welcomed the New Year with optimism, buoyed by the expectations of a business-friendly and crypto-friendly Trump administration. However, just two months in, U.S. stock performance has struggled to keep pace with European and Chinese markets, while Bitcoin prices have dipped, raising alarms about inflation’s potential impact.

U.S. Stocks Experience Setbacks

On a turbulent Tuesday, U.S. stocks faced a downturn as investors responded to disappointing results from a consumer confidence survey. The Conference Board’s consumer confidence index recorded its steepest drop since August 2021, reflecting growing worries about inflation.

• The Dow Jones Industrial Average showed some resilience, closing at 43,621, marking a slight increase of 0.37% after a midday rise.
• Conversely, the S&P 500 fell by approximately 0.47%, while the tech-heavy Nasdaq Composite experienced a significant decline of 1.35%.

This marked the fourth consecutive session of losses for both the S&P 500 and Nasdaq. Since President Donald Trump took office on January 20, all three major U.S. stock indices have been in the red, with the Nasdaq down over 1% since the beginning of the year.

Investor Sentiment Deteriorates

After a strong rally following Trump’s re-election in November, where the S&P 500 recently achieved a record high, investor sentiment has shifted dramatically. Concerns about persistent inflation and uncertainty surrounding Trump’s trade policies have led to heightened anxiety. According to CNN’s Fear & Greed Index, investors are now in a state of “extreme fear,” a condition not seen since December.

In light of these uncertainties, many investors are pivoting away from stocks toward more secure assets, such as government bonds, while also offloading riskier investments like cryptocurrencies. Bitcoin, which saw its value peak at $106,000 around the time of Trump’s inauguration, has plummeted nearly 16% over the past month, trading at about $88,000 on Tuesday.

Market Dynamics and Global Trends

The yield on the 10-year U.S. Treasury note fell to 4.29% on Tuesday, indicating a flight to safety among investors amid fears of economic instability and weaker growth projections.

Retail giant Walmart added to the market’s unease last week by projecting slower sales for 2025 than previously anticipated, further spooking investors.

• The VIX, often referred to as Wall Street’s fear gauge, spiked to its highest level of the year before pulling back slightly.

In contrast to the U.S. struggles, global markets have been thriving. Europe’s STOXX 600 Index has surged nearly 10% this year, while Chinese stocks continue to outperform American equities.

According to analysts at Goldman Sachs, “The launch of DeepSeek’s LLM has reignited interest in Chinese tech, which has surged over 35% from its January lows, while developments regarding Ukraine have bolstered the performance of European tech companies.”

Assessing the Bull Market’s Future

Despite the recent downturns, both the Dow and broader S&P 500 indexes have seen gains since Trump’s re-election and remain slightly positive since the start of 2025. The S&P 500 had previously enjoyed back-to-back gains exceeding 20% in 2023 and 2024, prompting questions about the sustainability of this bull market moving forward.

Tech stocks, which previously fueled gains in U.S. indices, have recently faltered. Notable declines include:

• Nvidia (NVDA)
• Palantir (PLTR), which dropped about 30% in just five days
• Tesla (TSLA), whose shares fell 8.4% on Tuesday, lowering the company’s market capitalization below the $1 trillion threshold.

According to a quarterly sentiment survey by Charles Schwab, two-thirds of traders believe the market is currently overvalued, although bullish sentiment still prevails with 51% of traders remaining optimistic compared to 34% who are bearish.

James Kostulias, head of trading services at Charles Schwab, noted, “While most traders see signs of market froth, they also believe there’s still potential for bullish momentum.”

Looking Ahead

Amid this uncertainty, some strategists maintain that robust corporate earnings may provide the support needed for stocks to rebound. Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, remarked, “As we anticipate continued volatility influenced by Trump’s policies, we believe markets will refocus on strong fundamentals that could sustain the equity rally.”

As the year progresses, investors remain watchful, balancing caution with the potential for resurgence in the markets.