Five things to know about the US$5 trillion market selloff that is roiling the globe

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About US$5 trillion in shareholder value was wiped off the S&P 500 on Thursday and Friday, as concerns over an escalating global trade war hit markets.

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The selloff in stocks deepened following United States President Donald Trump’s “Liberation Day” announcements of the harshest tariffs in about a century. On Friday, China announced a 34 per cent tariff on all U.S. imports in retaliation, as fears grow that tariff moves will trigger a global recession.

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Here’s what investors need to know about the selloff, the worst two-day market decline since the COVID pandemic.

Major indexes

The S&P 500 index ended Friday in its worst two-day rout since March 2020, dropping more than 10 per cent and losing about US$5 trillion in value. The Nasdaq 100 declined by about six per cent, pushing it into bear market territory. The Dow Jones industrial average also fell more than five per cent. In Canada, the S&P/TSX composite index closed 4.7 per cent lower, to 23,193.47 points, reaching its lowest level since September 2024. Though Morningstar’s Canada index plummeted 3.25 per cent Friday morning, it has continued to outperform the firm’s U.S. index.

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Volatility index

The Cboe Volatility Index (VIX), the market’s “fear gauge,” surged to nearly 45.31, a closing level last reached in the opening months of the COVID-19 pandemic, indicating heightened investor anxiety. This reflects concerns over the escalating trade war and its potential to trigger a global recession. ​Since its launch, the VIX, which measures the expected volatility of the S&P 500, has averaged about 20 per cent. “When there is fear in the market, as the VIX is telling us, everything will sell off,” Jay Woods, chief global strategist at Freedom Capital Markets, told Bloomberg.

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Sectors hardest hit

Energy and technology sectors experienced notable declines due to their sensitivity to global trade dynamics. Oil hit a four-year low on expectations of a global slowdown, with West Texas Intermediate crude falling more than six per cent to about US$62 a barrel, according to Oilprice.com. Brent crude was down about six per cent to about US$66, the lowest since 2021, as OPEC+ moves to increase output just as tariffs threaten energy demand.

Big Tech stocks with exposure to tariff-hit China slumped, including Nvidia Corp., which dropped more than seven per cent, Tesla Inc., which dropped more than 10 per cent, and Apple Inc., which dropped more than seven per cent.

Other stocks hit hard included Boeing Co., which fell more than nine per cent, and Goldman Sachs Group Inc., which declined more than seven per cent, leading the Dow lower.

Safe havens: bonds, crypto and gold

Investors are buying government bonds, leading to a significant drop in yields. The 10-year Treasury yield has fallen below four per cent. Bitcoin was trading about one per cent higher at just over US$84,000 on Friday. Investors have been buying more gold and gold funds recently, pushing the price to a record US$3,148.88 a troy ounce this week as they seek a safe haven from market uncertainty. But bullion slipped more than two per cent to US$3,037.65 an ounce, caught up in the selloff.

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Buy the dip?

Though retail investors often see opportunity when stocks dip, even they seem to be spooked. JPMorgan Chase & Co. reported retail orders amount to net selling of US$1.5 billion as of noon, compared with figures showing individuals were net buyers of US$4.7 billion of shares just a day ago.

The fastest U.S. stock market selloff since the depths of the COVID pandemic has left valuations looking cheaper than they have been for a while, but the S&P 500’s trailing price-to-earnings ratio still sits at 23, with room to fall further.

Given concerns about inflation and tariffs, analysts lowered earnings per share estimates for S&P 500 companies for the first quarter by a larger margin compared with the three most recent averages, according to FactSet Research Systems Inc. “What we’re seeing is a big reassessment of global risk but obviously focused on the U.S.,” James Rossiter, head of global macro strategy at TD Securities, told CNBC.

— With files from Bloomberg.com

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