The stock market is shaking amid the Trump-induced fear of 'R (Recession)'. Following the plunge in the New York stock market, the domestic market also started with a sharp decline, spreading a sense of fear.
As of 9:40 a.m. on the 11th, the KOSPI stood at 2,525.59, down 44.80 points (1.74%) from the previous day. The KOSDAQ was down 11.55 points (1.52%) at 714.27. Both indices started with declines exceeding 2%. All of the top 10 KOSPI market capitalization stocks were in the red. Samsung Electronics was down more than 1%, SK Hynix and LG Energy Solution fell by over 3%, and Hyundai Motor and Hanwha Aerospace saw declines in the 2% range.
On the previous day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average (Dow) closed at 41,911.71, down 890.01 points (2.08%) from the previous trading day. The large-cap S&P 500 index ended at 5,614.56, down 155.63 points (2.69%). The tech-heavy Nasdaq index plunged 727.9 points (4.0%) to close at 17,468.33, marking the largest daily drop in two and a half years since September 2022.
Among individual stocks, large tech stocks showed a sharp decline. U.S. electric vehicle maker Tesla plummeted 15.43%, the largest single-day drop since 2020. AI leader Nvidia fell 5.07%. Alphabet, Google's parent company, and Meta, Facebook's parent company, dropped 4.41% and 4.42%, respectively.
The Chicago Board Options Exchange Volatility Index (VIX), known as Wall Street's 'fear index,' surged 19.04% to 27.81 points compared to the previous trading day.
Due to uncertainty over tariff policies, demand for safe-haven assets has surged, pushing up government bond prices and lowering bond yields. The U.S. 10-year Treasury yield, a global benchmark for bond yields, fell 10 basis points (1bp=0.01 percentage point) to 4.21% from the previous day, while the 2-year Treasury yield, sensitive to monetary policy, dropped 10 basis points to 3.89%. Expectations that the Fed may accelerate monetary easing due to a recession are also driving down Treasury yields.
The domestic stock market is also fluctuating following the New York market amid U.S. President Donald Trump's remarks indicating a willingness to proceed with tariff policies even at the risk of a recession. In an interview with Fox News on the 9th, when asked about the possibility of a recession this year, Trump said, "I don't want to predict such a thing," but added, "We are doing something very big to bring wealth back to America, and there is a transition period in such matters." He hinted at maintaining a firm stance on tariff policies, not ruling out a temporary recession. President Trump reaffirmed his intention to implement reciprocal tariffs on the 2nd of next month. On the same day, U.S. Commerce Secretary Gina Raimondo also announced that a 25% tariff on all steel and aluminum products entering the U.S. would be imposed as scheduled on the 12th.
Major Wall Street banks have been lowering their economic growth forecasts for this year amid tariff policy uncertainties. Goldman Sachs described trade policy as significantly negative and downgraded the U.S. annual GDP growth forecast for this year from 2.4% at the beginning of the year to 1.7%. The probability of a U.S. recession in the next 12 months was raised from 15% to 20%. JP Morgan increased the recession probability forecast from 30% to 40%. Earlier, Morgan Stanley had already lowered its GDP growth forecast for this year from 1.9% to 1.5%. The fear of R, that Trump's tariff hikes will lead to inflation, reduced consumption, decreased corporate investment, and slower growth, is rapidly spreading. Shelby Macfaddin, an investment analyst at Motley Fool Asset Management, said, "The administration is seriously stating for the first time that the goal will cause pain." George Cipollini, portfolio manager at Penn Mutual Asset Management, said, "This administration is fundamentally different from the previous one," and warned, "It could lead us to a potential hard landing."
Market outlooks have also been downgraded. Morgan Stanley predicted that if signs of a recession appear, the S&P 500 index could fall by up to 20%. Michael Wilson, head of U.S. equity strategy at Morgan Stanley, said, "If growth declines further and a recession occurs, the S&P 500 could drop nearly 20% from current levels. We are not there yet, but the situation can change quickly." JP Morgan expects the S&P 500 to fall to 5,200, while Citigroup sees it dropping to 5,500. Last December, the top 10 major banks had forecasted the S&P 500 to rise 10% by the end of 2025 to 6,550.
Meanwhile, this week will see the release of inflation indicators that could influence the timing of the Federal Reserve's resumption of rate cuts. On the 12th, the Consumer Price Index (CPI), a retail price indicator, will be released, followed by the Producer Price Index (PPI), a wholesale price indicator, on the 13th. The February CPI is expected to have risen 2.9% year-on-year, a slowdown from the previous month's 3%. The PPI for the same month is forecast to have increased 0.3% month-on-month, also below the prior month's 0.4%. Amid growing concerns that high inflation may become entrenched, these will be the last inflation indicators released before the March Federal Open Market Committee (FOMC) meeting scheduled for the 18th-19th.
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