If the vibes have felt off to you lately, you’re not imagining it—this week was the worst for the S&P 500 since September 2024, and the worst week for the Nasdaq since September 2023.
“It seems like the hits keep coming for equity investors,” wrote UBS Head of Equities David Lefkowitz in a note today. “First it was rapidly rising interest rates in December. Then it was DeepSeek and firmer inflation readings. And now investors are contending with an onslaught of tariff threats that can make your head spin—not to mention the uncertainty about government policy in general.”
But of all the chaos—sticky inflation, an Oval Office fight livestreamed for the world to see, or China eating Silicon Valley’s lunch—Trump’s tariff policies seem to be spooking corporate America the most.
The T-word was a huge topic this earnings season, with “tariffs” mentioned in the earning calls of 221 companies on the S&P 500. They weren’t bringing the topic up to complement those pesky levies—huge taxes on imports could seriously hurt corporate America’s bottom line. For example, 72 companies in the S&P 500 issued negative forward-looking guidance for Q4, way above the five-year average of 56, according to FactSet.
It’s not just big businesses that are feeling the pain. This week, the American Association of Individual Investors reported that a mere 19% of respondents in a weekly survey of investors said they expect equities to be higher over the next six months—a lower reading than 98% of all the organization’s surveys, according to UBS.
Time to worry?
We get it—there are a lot of reasons to be anxiously refreshing your portfolio. But the negative sentiment could actually be a good thing.
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“Perhaps somewhat counterintuitively, stocks typically perform well after poor sentiment readings,” wrote Lefkowitz. “Not only do returns tend to be higher, but there is also a higher probability of a market gain—a year later stocks are higher 85% of the time.”
Don’t forget that February is just a typically bad month for stocks in general, and Februaries after an election year have been the worst month for the S&P 500 on average since 1950, explained Ryan Detrick, chief market strategist at Carson Group.
The silver lining? “This is still a bull market and this seasonal weakness doesn’t have us overly concerned yet,” Detrick wrote. “A week ago many wondered how stocks could be back at new highs with all of the negative headlines and the easiest answer is we are in a bull market and stocks tend to go higher in bull markets.”
So wake up from your bearish hibernation—spring is coming, and the entire S&P 500 is on sale.—LB