The estimated blow to the U.S. stock market is approximately $1 trillion following consecutive days of losses this month, according to financial data.
Investors’ hand-wringing about the prospect of the Federal Reserve increasing interest rates has resulted in multiple days of sell-offs, and publicly traded corporations have seen their market capitalization decrease dramatically as a result. CNBC reported on Monday that top-tier Fortune 500 companies like Apple, Wells Fargo, and Berkshire Hathaway each lost at least $30 billion in market capitalization since the end of January.
While the Dow Jones Industrial Average (DJIA) plummeted significantly on Monday — dropping by as much as 1,500 points prior to the closing bell — the S&P 500 has also been dropping rapidly. All gains the S&P 500 made in 2018 have been erased by the recent sell-offs in February. The Nasdaq Composite has dropped by more than 400 points since February 1.
On Friday, the DJIA dropped by 666 points, making it the worst day for the Dow since June of 2016, when the United Kingdom’s “Brexit” vote roiled the stock market amid news the UK would be leaving the European Union. The January 2018 jobs report, which showed workers’ wages were slowly on the rise, prompted speculation that the Fed would soon raise interest rates and inflation.
Shortly after Trump was elected, economists with the British financial services firm Legal & General predicted that the Trump presidency would bring about an economic boom in 2017 and 2018, followed by a significant crash in 2019 due to Trump’s then-proposed corporate tax cut package (which has since been passed and signed into law). Legal & General feared that a depletion of U.S. tax revenue coupled with Trump’s promises to dramatically increase military and infrastructure spending would result in a “catastrophic widening of the budget deficit” and prompt the Fed to raise interest rates and inflation.
Matthew P. Robbins is a freelance economics contributor covering wages, budgets, and taxes. He lives in Chicago, Illinois with his husband and two cats.