U.S. markets have seen a historic decline over six weeks amid President Donald Trump‘s tariff policies, marking a historically swift destruction of equity capital that’s outpacing previous major crashes without the traditional bond market safety net, according to financial strategist Lawrence McDonald.
What Happened: “Last 20 years, large equity market risk-off events have — always — brought in ‘flight to quality’ buyers of long duration U.S. Treasuries. Not this time,” McDonald, founder of Bear Traps Report, wrote Monday on X.
McDonald’s analysis shows Trump’s tariff-induced selloff has wiped out $9 trillion in just six weeks, rivaling the $9 trillion lost during the COVID crash in 2020 over one month and surpassing the $8 trillion erased during the 12 months following the Lehman Brothers collapse in 2008.
The only period with greater losses was the 2022 inflation-driven downturn, which saw $10 trillion in value destroyed over 11 months.
The strategist’s accompanying chart of U.S. 30-Year Bond yields reveals a critical difference: unlike previous market crises when bond yields dropped sharply as investors sought safety, current yields remain elevated near 4.5%.
“When equity market investors were struck by the Lehman (-55%) and Covid (-35%) drawdowns, they were blessed with long-term bonds,” McDonald noted, estimating the bond offset saved investors $7 trillion during those crises.
According to Reuters, Trump’s tariff spiral wiped out $10 trillion in major markets worldwide.
Why It Matters: The pattern shift comes as markets reel from Trump’s sweeping tariff threats, particularly against China, which vowed to “fight to the end” against the proposed 50% duties. The selloff briefly intensified Monday morning before an afternoon recovery.
The Dow Jones Industrial Average, tracked by SPDR Dow Jones Industrial Average ETF DIA dropped 349 points, or 0.91%, to close at 37,965 after falling more than 1,700 points earlier in the session. The S&P 500, tracked by SPDR S&P 500 SPY, slipped 0.23% to finish at 5,062.25, recovering from a session low that saw a 4.7% decline.
Despite mounting market pressure, Treasury Secretary Scott Bessent attributed the selloff to tech valuations rather than administration policy, calling it “more a MAG 7 problem than a MAGA one.”
Meanwhile, fixed income investor Jeff Gundlach suggested the Federal Reserve’s policy stance is too restrictive, noting the 2-year Treasury yield has dropped to 3.5%, though he doesn’t anticipate immediate rate cuts “unless the losses in risk assets greatly increase.”
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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